Does a Guarantor Go on the Mortgage?

The Guarantor’s Place: Separating Fact from Fiction in Homeownership

The homebuying process involves several parties, each with distinct roles. Understanding these roles is crucial for a smooth transaction. This article tackles a common question: does a guarantor’s name appear on the mortgage title? We’ll explore the guarantor’s function and how it differs from ownership. [ 1 ]

The Guarantor’s Responsibility: Security, Not Ownership

Standing By the Borrower:

When you agree to be a guarantor for a mortgage, you become legally liable for repaying the loan if the borrower defaults. This means the lender can come after you to collect the outstanding balance, including principal, interest, and any additional fees.

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Providing a Safety Net:

The guarantor acts as a safety net for the lender, giving them additional assurance that the loan will be repaid. However, this role does not grant the guarantor any ownership rights to the property itself.

Distinct from Co-Signer:

It’s important to distinguish between a guarantor and a co-signer. A co-signer’s name appears on the title alongside the borrower, and they share ownership rights and responsibility for the mortgage payments.

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Understanding the Title: The Paper Trail of Ownership

Property Deed:

The title, also known as the property deed, is a legal document that officially recognizes the owner or owners of a piece of real estate. It outlines their rights and interest in the property.

Guarantor Not Listed:

Since a guarantor has no ownership rights in the property, their name will not be included on the title. Only the borrower(s) who are financially responsible for the mortgage and own the property will be listed on the title.

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Example:

If you take out a mortgage to purchase a home and your friend agrees to be a guarantor, only your name will appear on the title as the owner. Your friend, the guarantor, will not have any ownership rights despite their guarantee on the loan.

Focus on the Guarantee: Understanding the Guarantor’s Role

While the guarantor’s name is not on the title, their role comes into play if the borrower defaults on the mortgage:

• Lender’s Options:

  If the borrower stops making payments, the lender will attempt to collect the debt from them first. This might involve sending collection notices or initiating foreclosure proceedings.

• Guarantor’s Obligation:

  If the lender is unable to recover the full amount from the borrower, they can then turn to the guarantor to fulfill their guarantee and repay the outstanding debt.

It’s important to remember: The specific steps a lender takes to recover money from a guarantor will vary depending on the circumstances and the laws in your jurisdiction. Consulting with a lawyer is recommended if you find yourself in this situation.

The Importance of Clarity: Guaranteeing a Mortgage with Open Communication

When considering acting as a guarantor, clear communication is essential:

• Review the Agreement:

  Carefully read the mortgage agreement to understand the guarantor’s obligations and the potential consequences if the borrower defaults.

• Open Discussion with Borrower:

  Have an honest conversation with the borrower about their financial situation and the possibility of needing to rely on your guarantee.

• Separate Legal Advice:

  Consider seeking independent legal advice to ensure you fully understand the legal implications of being a guarantor.

By openly discussing expectations and potential scenarios, all parties involved can navigate the process more effectively.

Alternatives to Consider: Exploring Other Options

In some situations, there might be alternatives to relying on a guarantor for a mortgage:

• Building Credit History:

  If the borrower has a limited credit history, they can focus on building their credit score by making timely payments on bills and credit cards.

• Larger Down Payment:

  A larger down payment can improve the borrower’s chances of loan approval and potentially reduce the loan amount needed.

• Co-signing (if applicable):

  Co-signing a loan means becoming equally responsible for the debt alongside the borrower. This can be an option, but it comes with its own set of risks and responsibilities.

It’s important to weigh the pros and cons of each option to determine the best course of action for the borrower’s specific situation.

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Guarantors and Titles: Distinct Roles

While a guarantor plays an important role in securing a mortgage for some borrowers, their responsibility is financial, not ownership related. The guarantor’s name will not appear on the property title. Understanding the potential consequences of acting as a guarantor and the importance of clear communication is essential before entering such an agreement.