How to Approach a Friend or Family Member about Being a Guarantor
It’s no secret – getting into the property market can be tough. It takes hard work, time and money, but sometimes getting into the property market at an opportune time can be very beneficial.
Using a guarantor can help you buy property at an earlier stage without a deposit, which could save you time and allow you to reap the benefits of getting into the property market sooner.
How does a guarantor loan work?
Applying for a home loan with a guarantor eliminates the need for a deposit. Instead of a deposit, a lender accepts security from the guarantor, usually a percentage of the value of their own property. If you default on your loan, then the guarantor is liable. It’s a big weight to carry and for this reason, asking a friend of family member to act as guarantor isn’t always an easy thing to bring up. So how does one even begin to broach the topic?
Pick the right person
Choosing the right family member or friend is the first step. Ensure you are approaching a friend or family member with the means to act as guarantor. Often, we can gain an understanding of one’s financial situation through casual conversation, so be sure to listen carefully and take your time deciding on who you should approach.
Through spending time with the family member or friend you may also become aware of how they would feel about acting as a guarantor, so keep your ear to the ground and do some reconnaissance before you approach them about being your guarantor.
Choose the right time
Timing is important when it comes to approaching a family member or friend about being a guarantor. Discuss the topic with them privately – bringing it up in front of other people can put the potential guarantor on the spot and lead to undue pressure.
Ensure you have ample time to discuss your request in detail and give the potential guarantor plenty of time to ask questions. Arrange a time that suits your guarantor and be flexible with your own schedule. Remember, they are doing you a favour so make your meeting convenient for them.
When it comes to timing, you will also want to give the friend or family member enough time to think over the request carefully. Ask them well before you find the perfect property, so you don’t need to put any pressure on timing. Allowing them space to consider the request will avoid any rushed decisions that could lead to the guarantor pulling out at the last minute.
Give them the right information
Before you approach the potential guarantor, you should have all necessary information ready. This will ensure your friend or family member is well informed and you can answer all their questions. Research the type of loan you would like to apply for, so you have the specific details ready to share. It is helpful to inform the friend or family member exactly what you will require of them and the commitment involved. Equipping the guarantor with all information will help them to make an informed decision.
With the right person, the right timing and the right information you can approach a family member or friend with confidence.
At Mortgage House, we’re no strangers to the homeowner’s journey. It’s a long (but rewarding) one. If you’re thinking about asking a guarantor to eliminate the need for a home loan deposit, you can read more about our Family Pledge loans here.