Are you in need of a guarantor to secure a home loan. Then you should a security backed guarantee. You may borrow 100% of the purchase price by using someone else’s property as security.
What is a security guarantee?
This is a guarantee where a real estate is provided to act as security for the loan. This is the most used type of loan covering about 90% of the loans.
Who can give a security guarantee?
Any friend and family having a property and willing to set it as security for a loan. Majorly, a son or daughter who is willing to buy a home can use their parent’s investment or home as security enabling them to borrow up to 100% of the purchase price.
How does the guarantee work?
The security guarantee can be in two forms; mortgage or second mortgage. Using a security guarantee, the bank may need the guarantor to accomplish the borrower’s obligations.
What does a security guarantee include?
The contract binds the guarantor to meet the obligations of the borrower. Contrary to this,
The certificate Title will be held by the bank until the guarantee is removed. The document indicates that the guarantor is liable for the debt including funds borrowed, fees, or interest.
When is this guarantee released?
A request to release the guarantee can be sent by either the borrower or the guarantor. The loan is then reassessed looking whether the borrower has enough equity in the property. Other conditions need to be fulfilled first before the guarantor is released. It is important that these conditions be met before the guarantee can be released.
What should the borrower consider?
When taking out a loan supported by this type of guarantee, certain consideration must be put in place first. The guarantor is taking a considerably a large risk and is required to be financially responsible if the borrower defaults. Because of this, it is necessary you have a good income that can support the loan. This reduces the chances of calling on the guarantee.
What the guarantor should consider
Before choosing to become a guarantor, certain factors should be considered:
The amount being borrowed.
The income of the borrower
Is the borrower responsible enough?
Do you have a stable income that can repay the loan when the guarantee is called upon?
Before taking out a guarantee
Before you enter into the guarantee, consider your employment stability as well as the financial position. In an event you may not adhere to the agreement, it is recommended you do not enter the agreement. Seek legal advice accepting the agreement.