Entering into a mortgage guarantee is a profoundly serious legal commitment. Often required by lenders, a guarantee makes you, the guarantor, responsible for repaying a loan if the borrower fails to meet their obligations.
It’s crucial to understand that this is not a secondary commitment. If the borrower defaults, the lender is typically entitled to pursue you directly for the debt without first taking action against the borrower. This liability extends beyond the principal loan amount and can include interest, default interest, and various enforcement or legal costs incurred by the lender.
For this reason, obtaining independent legal advice is paramount before signing any guarantee documentation. A solicitor will explain the legal nature, effect of the documents, the obligations you are assuming, and the consequences of default. Your legal advisor, however, cannot provide financial suitability advice—that is a matter for your accountant or financial adviser.
The decision to sign must be entirely your own, made only after you fully grasp the nature of the obligations and are comfortable with the risks, which can include the lender taking legal action against your personal assets. Approach the decision as if you were borrowing the money yourself.
For further guidance, visit A Guide to Guarantor Obligations