Ive been asked to “go guarantor” on my child’s home loan – what does that mean?

Who is a guarantor?

A guarantor is a person who agrees to take responsibility for another party's debt or obligations if that primary debtor defaults.

What can the bank do if your child defaults?

If your child defaults on his/her mortgage obligations, generally by missing mortgage repayments when due and owing, the bank can pursue the guarantor for the debt.

Practically, if the child is in default the bank would in the first instance generally sell the house against which the mortgage is registered and pursue the guarantor for any shortfall owing on the debt.

Pursing the guarantor usually means demanding repayment of the debt from the guarantor and proceeding with obtaining judgement against the guarantor (which subsequently allows the bank to sell assets owned by the guarantor) if the debt is not repaid.

What is the risk of “going guarantor”?

The risk for parents “going guarantor” for their child is that assets in the parents’ personal names, including the family home, may be at risk of being sold if the child defaults.

What are the legal requirements?

A guarantee must generally be in writing to be enforceable.

Independent legal advice is often required to ensure the guarantor understands the risk.

Contact MobbsMarr Legal for independent legal advice required by guarantors.