One of the biggest dreams of a man is to buy a home for himself and get settled. But it is not as easy as it sounds. You should work hard and strive a lot to achieve that dream of buying your own home. It involves a lot of thought processes and decision makings. One of the major decisions you should make is from the financial point of view. Your financial state plays a major role in buying a home. Not everyone could afford to buy their own home at once.
This is one of the biggest problems faced by individuals in this process. So, they rely on banks and other finance companies to assist them. They could get a home loan and repay them in monthly installments for a certain period of time, but the lenders provide the loans bases on a number of terms and conditions.
Among those, lenders ask to assign a guarantor on the home loan. Being a guarantor for a home loan is a complicated process, but it won’t be that if you know certain factors before you sign up as a home loan guarantor.
Type of guarantor
This is one of the most important factors you should be mindful enough before signing as someone’s home loan guarantor. There are two types of guarantors financial and non-financial guarantors. If you sign as a financial guarantor, you should be providing your financial documents to the lender, which you should be doing if you know the borrower very well and if you trust them only.
And if you sign as a non-financial guarantor, the lender will be getting in touch with you if he cannot contact the borrower. So, you should have a clear idea about your role before signing the documents. You should be signing for a guarantor home loan only if you have faith in the borrower.
As mentioned above, financial guarantors and non-financial guarantors have their own different kinds of roles and responsibilities. If you are signing as a financial guarantor you are named as the person who will be paying the outstanding loan amount and other due amounts if the borrower is not capable of paying them.
Even if the borrower goes missing, you will be the person in charge and you should pay the loan in his absence. So, if you have a choice of being a financial or a non-financial guarantor, it is way better to sign as a non-financial guarantor.
Your loan eligibility
This is one of the most important things most home loan guarantors do not have a proper idea about. Signing as a home loan guarantor will also affect your own loan eligibility. Because in case the borrower is not capable of repaying the loan, you will be held accountable and you should be paying off the loan. So, this will make a huge impact on your eligibility for taking a home loan later on. This could reduce the probability of getting yourself a home loan for the loan amount you actually requested.
Life is full of unexpected scenarios, you could not predict what will happen tomorrow. So, if you are signing as a home loan guarantor you should consider your income. Because in case you have to repay the loan which the borrower had taken, you should be capable of doing it. If not you would have to face legal issues later on.