Mortgage loans, which include both Home Loans and Loans Against Property, are loans of a secured nature and require the pledging of collateral. While a valuable collateral may be enough for lenders to sanction the loan, a guarantor further enhances the quality of a mortgage loan application.
A guarantor, by definition, co-signs the primary borrower's loan application, in effect guaranteeing the repayment of the loan amount, with interest, in case they can no longer pay back the lender. As a guarantor, you bear financial responsibility in the advent of a loan default by the primary borrower.
Prospective borrowers should take note that there are two types of guarantors who can co-sign a mortgage loan application:
- Financial Guarantor: This individual agrees to repay the loan amount in case of loan repayment failure
- Non-financial Guarantor: This individual vouches for your credibility and application profile
The decision of which type of guarantor may be required depends on the loan application and case scenario.
If a borrower fails to meet the eligibility benchmark of a Loan Against Property, introducing a mortgage loan guarantor may help their case. This is particularly true if the primary borrower is aged and nearing retirement or has a credit score below the eligibility requisite. Here are some conditions that may warrant the need for a loan guarantor:
- The primary applicant’s financial standing is not up to the mark
- The primary applicant has a high-risk job profile
- The primary applicant’s age is close to the maximum age considered at the time of loan maturity
- The primary applicant’s loan amount requirement is higher than their repayment capacity
Just as a borrower has a set of eligibility parameters to meet to be approved for a mortgage loan, a mortgage loan guarantor may also be judged based on the following criteria to add value to the Home Loan application.
- Stable income source
- Strong credit profile
- Strong repayment capacity
- Ready assets to serve as collateral
Mortgage loan guarantors must consider every possible loan outcome before they make the decision to co-sign a mortgage loan.
Note: This page is for the purpose for generic information. Whether a guarantor is requested in your case will depend on your profile and the lender.
*Terms and conditions apply
