All Topics / Help Needed! / Difference between being a guarantor to the loan and own the loan

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  • Profile photo of Thush80Thush80
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    @thush80
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    Does any one know any link which I can share with bank  to show the difference between  being a guarantor to a loan and   own the loan.

    This is really urgent and if anyone can help with me a link that bank can accept would be a great help

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
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    Why would a ‘bank’ be interested in reading a link to an article?

     

    What are you trying to show them? And Why?

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Steve McKnightSteve McKnight
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    @stevemcknight
    Join Date: 2001
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    LOL.

    Terry makes a good point about banks not looking at links. They will have their own policy, and their own legal department.

    The principle is this though: a mortgagor is different to a guarantor.

    The mortgagor receives the proceeds for the loan and is responsible for making repayments, and adhering to the terms and conditions of the loan.

    A guarantor does not receive the loan proceeds, but agrees to be responsible for repaying a debt owed if the borrower(s) can’t make their repayments.

    (for more information on being a guarantor, see: https://www.commbank.com.au/content/dam/commbank-assets/home-buying/home-loans/docs/004-150-guarantor-information-sheet.pdf)

    Having a guarantor usually allows a mortgagor to borrow when they otherwise couldn’t, or else borrow more.

    Importantly, a mortgagor has the liability for the debt whether it is in default or not. However, a guarantor only ‘owes’ the debt if the loan is in default and the guarantee invoked. Provided the loan is not in default, there is no liability recorded on the guarantor’s balance sheet, although the existence of the guarantee would need to be disclosed as a contingent liability in the notes to accounts, if such disclosure is required. For this reason, providing a guarantee is sometimes known as ‘off balance sheet financing’.

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
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    Success comes from doing things differently

    Profile photo of TerrywTerryw
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    @terryw
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    Steve, you have confused terms here or conflated ‘borrowers’ with ‘mortgagors’.

    Mortgagor is the one who gives a mortgage

    Borrower is the one who borrows the money

    usually but not always they are the same

    e.g husband owns the property and husband and wife go on the loan. Husband is the mortgagor and both are the borrowers.

    You cannot be a mortgagor without being an owner – it is impossible to mortgage something you don’t own. A mortgage is the security for the loan.

     

    A guarantor is one who provides a guarantee. There are 2 types

    a) security guarantee who the guarantors property is used as security. parental loans where the parents property is used as second security for the adult child’s loan so that no deposit is needed.

    b) Income guarantee. These are only allowed for company borrowers and spouses generally. A new company has no income so when it borrows the lender will rely on the income of the guarantor – which will be all directors usually.

    A guarantor is only liable for the debt if the borrower defaults.

     

     

     

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of theonetonetheonetone
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    @theonetone
    Join Date: 2021
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    Terry makes a good point about banks not looking at links. They will have their own policy, and their own legal department.

    Haha… Too right Steve! Banks are a bit of a law unto themselves, I think we’ve probably all experienced that at one point or another!

    This is really urgent and if anyone can help with me a link that bank can accept would be a great help

    People might be able to provide a bit more help if you can give us a bit more context? For example, do you have a friend/family member who might be willing to be guarantor for your loan? Or perhaps the other way around?

    Profile photo of BeshamelBeshamel
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    @beshamel
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    The guarantor vouches for the borrower – guarantees the bank that the loan will be repaid on time. The guarantor does not have to keep track of the borrower’s payment schedule. If the borrower is late with the payment for a couple of days, the guarantor is not threatened with anything. But if the delay is severe, the bank will demand from the guarantor, and then the debt will be reflected in his credit history. For large loans, co-borrowers and guarantors can be involved simultaneously. If the borrower stops paying, the co-signer will repay the debt. If he fails to make payments, the guarantor will have to pay.

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