Would you go Guarantor for your son or daughter?

Congratulations you paid off your home loan! Your children or child has all grown up and moved out. Now your looking forward to your retirement.

Now its time for your son or daughter to buy their first home or business or real expensive car and the bank will not lend them the money. They say they will not lend them the money unless they have a guarantor. Your son or daughter has promised that they can meet the repayments between themselves and their partner. Please mum and dad can you go guarantor for us.

The first thing that could happen is you could lose your own home and maybe even find yourself living on the street. As harsh as that sounds, unfortunately it happens. Your son or daughter may lose their job or become ill and not be able to make the loan repayments.

If you become a guarantor, what does it mean for you? A guarantor allows the equity in their home to be used as additional security for the Borrower’s loan. This can happen in a few different ways. All the equity in your home could be used as security or only a set amount could be used. Check the contract and ensure you fully understand what is required by you if your son or daughter can not make the repayments, for example if you have to repay the loan in full or only in part.

We know they may be family but it is essential that you get independent legal advice before signing anything. Never agree to any loan that is not scheduled to be repaid back by a certain date such as overdrafts or lines of credit. Do your checks and don’t get caught.