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Legal & money

Mortgage guarantor

(37 Posts)
Jaffacake2 Thu 14-Jan-21 08:39:08

Advice needed please fellow grans.
My daughter has asked me to be a guarantor on a new mortgage application. She is now single with young children and needs help to stay in the family home.
Had anyone ever considered being a guarantor for adult children ?

Esspee Thu 14-Jan-21 08:47:17

What exactly are you signing up for? Can you afford to bail her out if things go pear shaped? What if a new partner moves in?
I suggest you get professional advice as to what this entails for you.

rosie1959 Thu 14-Jan-21 08:52:50

Can you easily afford to pay her mortgage if things go wrong
Do you personally have the income to cover this or put your own home as security if she defaults
Not a step I would take lightly I have done it when my children were renting but this is a much bigger commitment
I also suggest you get professional advice

Jaffacake2 Thu 14-Jan-21 09:09:34

Thank you for your replies. I have some savings which at the moment are supplementing my NHS pension until I get state pension next year. I own my house which at some time I had thought of downsizing as on my own is a big place.
She has tried reassuring me that she would never default but then you never know what is going to go wrong in the future.
I'm worrying about it and feeling pressurised emotionally because of the impact on the 2 grandchildren of losing the family home. But also feel young children are resilient and adapt well to changes.
I had suggested that she and the kids move in with me and I would adapt the house for them but she said she could never live with me.

Mamardoit Thu 14-Jan-21 09:10:48

I know someone who did this for a family member (not a DC). They defaulted and the guarantor couldn't afford to make the payments. Ultimately the guarantor lost his own home. I sure it was the major factor in his marriage break up because he didn't tell his wife about the arrangement.

I refused to be a guarantor for an adult DC. They had to stay in rented accommodation and weren't happy. I did promise that they could move into our family home if things became too much. Fortunately we do have enough space to take a family in. They didn't have to take our offer up and are now doing ok.

Could DD move in with you or downsize? Could you give her a loan to tide her over, or help with child care so she can work more hours?

Certainly take legal advice. It is very difficult to see them struggle.

rosie1959 Thu 14-Jan-21 09:59:37

OP your house will be at risk if your daughter defaults and who can say they will never get ill or have an accident preventing them from working
I would never do it for my DC I would give them a deposit if I had the money but not guarantee a mortgage I could not afford to pay myself

Teacheranne Thu 14-Jan-21 10:41:51

I have acted as guarantor for my adult children when they were renting houses in their early twenties but I was aware that I would be responsible for the rent if they did not pay and could afford to make payments for a short period of time. I trusted them but knew that if they lost their job, I would help out with rent even without being guarantor. Luckily when they bought a property, I was not needed as guarantor for their mortgages.

If you cannot afford to pay the rent or mortgage in the event that your daughter does not keep up the payments, then you should not be guarantor - having said that, it would be very difficult to refuse!

mumofmadboys Thu 14-Jan-21 11:35:05

I think it depends on how reliable your DD is. It also depends on how much savings you have. Could you have an agreement with your DD that if she ends up not bring able to pay the mortgage you would pay for a set period of time eg 6 months and then the house would have to be sold. A home for your DD and your GC especially if she has become single recently is high on the list of priorities. Is your DD a good manager of money on the whole?

Oopsadaisy1 Thu 14-Jan-21 11:35:40

Wrong of your DD to ask you , I’m sure she knows your financial situation.

Unless you can honestly say that you can afford Her Mortgage Payments, plus all of her other outgoing Bills for an unlimited period , assuming that if she defaults she would have to sell up, possibly at a loss, could you afford to pay the difference in what she owes and what she gets from the sale? Plus all of your own bills, then it surely has to be No.

Odd that she can’t live with you but is potentially happy to wreck your life financially!

Tangerine Thu 14-Jan-21 11:41:10

I think you should take professional advice. It can be risky.

When my children were young and needed guarantors for the rent in shared houses, I did agree to this. It is not quite so permanent as when a house has been bought because you can leave rented accommodation and go somewhere cheaper slightly easier etc. etc.

However, I made it clear to them that I expected them to make every effort before things went pear shaped and I knew that, if push came to shove, I could afford their rent payments.

I think, in your circumstances, you should be very careful.

Toadinthehole Thu 14-Jan-21 11:46:13

We were asked in slightly different circumstances. When our son was at university, in London, he shared a house with six other people, in Kensington. The house was worth around 1.5 million then. We were happy to guarantee his rent for his room only, but not all the rents, for the whole house. The maximum we could have been asked for in rent was £20,000. That was before taking into account...anything else happening in the house, from the tenants, their visitors etc.
Guaranteeing is open ended. You need to work out the worst possible scenario, and ask yourself if you could afford it. Needless to say, our son didn’t live there. He actually moved home and travelled in for lectures. Most of his work was done at home. He saved £8,000 doing this.
I personally would never do it. If she can’t live with you in a house with ample space, then she shouldn’t be asking for your help.

NotSpaghetti Thu 14-Jan-21 11:47:26

We have just offered this to our daughter who is currently renting.
She is always in work, super diligent, but generally on 1 year - 3 year contracts. She ended one contract 31st December and already has one set up for next week.
Property in the area where she wants to live is cheap. There is no reason for us not to do this as she is 100% reliable and would be happy to sell if she suddenly became unable to work.

I know plenty of people I would not offer this to! Only you know your daughter but this was entirely our idea. It is much harder to get a mortgage on short-term contracts. She is "thinking about it".

If your daughter is 100% reliable I'd look at it. Otherwise I might offer a loan of what I could afford. It would have to be money I could afford to lose.

GagaJo Thu 14-Jan-21 11:51:43

I am with NotSpaghetti. I would offer money before I would act as guarantor.

midgey Thu 14-Jan-21 12:09:05

It doesn’t really matter how reliable, hard working or conscientious any body is, stuff happens. Unless you can afford the mortgage (and possible debt collection fees) I wouldn’t even contemplate it. Isn’t the homeless mantra that we are all only three major events away from being homeless?

GagaJo Thu 14-Jan-21 12:13:19

It is midgey. I have been there. Low income, divorce and landlord was selling my rental house. Low income, couldn't show how I could meet the rent on another property despite NEVER missing or even being late on a rent payment.

Peasblossom Thu 14-Jan-21 12:24:23

She needs a guarantor because the lender is doubtful about her ability to sustain the mortgage, for whatever reason.

A lender is not prepared to take the chance.
Food for thought?

David0205 Thu 14-Jan-21 12:32:31

Being a guarantor is tricky, it involves a valuation of your property, to be held as security against another loan, searches etc, so there may be costs involved of several thousands.
Can she realistically afford to meet the mortgage costs, gifting a lump sum to reduce the mortgage is easier, will reduce the payments and does not commit you beyond that amount.
So try to find another way to help you can, whatever you do don’t throw good money after bad, if the prospect is hopeless and the house is likely to be lost, DO NOT try to delay the inevitable. If any mortgage is foreclosed it takes time to get possession.

David0205 Thu 14-Jan-21 12:34:32

In addition don’t ever LEND to family give it.

Tangerine Thu 14-Jan-21 12:47:49

I know what you mean David0205. My Dad lent me £2,000 once because I was buying a car and was planning to take money from high interest savings for it. He had some money in a low interest account.

This was a long time ago when you got better interest in the Building Society. Anyway he lent me the money and I had paid him back within 12 months.

I think though that £2,000 is a much smaller amount and jobs were more secure in those days.

DiscoDancer1975 Thu 14-Jan-21 12:50:51

I wouldn’t do it. It’s a huge risk. One that the money lender doesn’t want to take, so why should you? I would keep offering a place in your home, otherwise I wouldn’t risk any of my money on her. You never know when you might need it, particularly being in a large house.

sodapop Thu 14-Jan-21 13:09:29

Yes I agree with Notspaghetti look at other ways you can help your daughter without being tied in to the guarantor agreement. If she can't live with you then maybe you can help with a rental somewhere until you have thought about downsizing or looked at alternatives. It's hard when its your child asking for help but I think this is one occasion when head must rule heart.

M0nica Thu 14-Jan-21 14:39:41

In the depth of the housing recession in 1993, we guaranteed a mortgage for DD. The flat was in south London, it had two bedrooms, one to be let to pay the mortage. It cost £32,000, very little even then, and we had £30,000 in available savings.

The key factors were: that letting one bedroom would bring in an income, nearly equal to the mortgage payment, and we had enough savings to pay off the mortgage if she defaulted for any reason. We would not need to remortgage our house or meet the default payments from income.

As I understand it jaffacake2 your situation could leave you faced with doing one or the other. so do not do it.

You have made a very generous alternative offer to house your daughter and her children. Do not let your daughter emotional blackmail you, bully you or harrass you in to doing something, which I think you know, in your heart of hearts, could ruin your relationship with your daughter for ever and bankrupt you.

Jaffacake2 Thu 14-Jan-21 15:59:05

Thank you all for your advice. I have definitely decided not to be a guarantor for her as I would worry that she would struggle with the mortgage repayments if she lost her job or through illness.
She may have to sell and rent for a few years whilst the children are little and she knows I would help with childcare or some money.
At present we don't seem to be communicating as she assumed I would go along with her plan. So feeling rather battered at the moment.

midgey Thu 14-Jan-21 17:08:39

Stay strong Jaffacake, I’m sure that she will realise she was being rather unreasonable/pushing her luck!

NotSpaghetti Thu 14-Jan-21 21:00:05

I know this is now decided Jaffacake and I think your daughter will come round and, i hope, you will be back on friendly terms again soon

However, I think you are wrong David0205 about lending. The thing is not to lend what you can't afford to lose.
Over the years we have lent thousands of pounds to friends and family alike. One loan of £2000 in the late 90s was returned within days. On the other hand, one to our son for a car was returned out of his Saturday earnings over three years. If a loan is returned we can loan it again if someone will benefit.

We were fortunate to have inherited some money years ago. Not a lot, but a lot to us. Why not help out if we can? We have been helped in the past. What goes around comes around. It's only money when you have it - much much more when you don't.