What Are the Conditions Under Which You Will Require a Guarantor for a Mortgage Loan?

A mortgage loan, also popularly known as a loan against property, is a type of secured loan that can be availed of by keeping an immovable asset as collateral with the lender. Thus, in the case of a mortgage loan, the funds are sanctioned against a house, commercial property, or plot of land. The lender holds on to the mortgaged property until the full amount is repaid. In the case of high-value property, the borrower does not necessarily need a mortgage loan guarantor. Nevertheless, if you want to apply for a guarantor, you should have complete knowledge and understanding of the procedure beforehand. 

What is a Mortgage Loan Guarantor?

A mortgage loan guarantor is a person who agrees to be responsible for your payments throughout the loan tenor. In case of a default, the guarantor comes forward and continues paying the outstanding loan amount.

Who Can Be a Loan Against Property Guarantor?

A mortgage loan guarantor acts as a co-signer. Most often, a guarantor is a family member or a close relative. To be eligible for the position of a guarantor, the individual must meet these criteria:

  • Must be an Indian citizen
  • Must be over the age of 18 years
  • Must have good financial standing with decent credit history

The lender will take into account the guarantor’s income and assets to ensure that he/she is capable of compensating for any shortfall in the monthly instalments should the borrower fail to make repayments on time. 

Under What Conditions Is a Guarantor Needed?

Considering that a loan against property is a secured loan, you will need a guarantor only under specific conditions. Here’s a quick look at the situations:

  • If the borrowed loan amount exceeds the limit as stated in the lender’s policy 
  • If you have low credit or CIBIL score indicating poor financial standing
  • If you are on the verge of retirement

Types of Loan Against Property Guarantor 

A mortgage loan guarantor falls under two categories – Financial Guarantor and Non-financial Guarantor.

A non-financial guarantor should suffice your purpose unless the amount borrowed is a huge sum and exceeds the property valuation and the lender’s policy. Such an individual can certify your credibility for the mortgage loan. 

A financial guarantor, on the other hand, will need to furnish all financial documents to take complete responsibility for repaying the loan in case of a default. It is a good idea to take your spouse, children, or a close relative as a financial guarantor, as they will be willing to share your financial burden if need be. 

Things to Keep in Mind Before Applying as a Guarantor for Loan Against Property

Those willing to apply for a mortgage loan guarantor must meet some of the criteria. Here are these criteria. 

Credit Rating

Default on loan repayments negatively impacts credit history and score. A bad credit rating presents a person as someone who is financially unstable, and therefore, someone who cannot be trusted to be a guarantor.

Liability to Repay the Loan

A guarantor is liable to repay the outstanding amount if the borrower misses a payment or can no longer continue with the repayments. This becomes legal once you sign on the dotted lines. However, this holds true for financial guarantors only, who are bound to pay the interest component on the missed monthly instalments as well. Thus, if you are planning to be someone’s guarantor, make sure you have the bandwidth to be responsible for someone else’s payments. 

No Objection Certificate (NOC)

Once a person has paid the home loan in its entirety, they must free themselves from the debt by obtaining a no-objection certificate. As a guarantor, you must free yourself of all debts and get a NOC confirming the completion of all repayments issued by the lender. 

Documents Needed for a Loan Against Property Guarantor

The lender will ask for the following documents before approving your application for a guarantor:

  • Proof of address
  • Proof of identity
  • Details of your monthly salary
  • Permanent Account Number (PAN)
  • Bank account statements

Besides, you will need to furnish details/statements of your liabilities and assets and establish your relationship with the borrower. 

Once you are prepared with all the documents and have understood the loan against property eligibility criteria set for guarantors, get in touch with the lender and apply online for a smooth, hassle-free experience. 

Related posts

Options trading in Asia: why you must use a demo account first

When it comes to trading options, there are a few things you need to do to increase your chances of…
Read more

How To Purchase A Laptop On Emi Without Using A Credit Card

With the birth of technology, laptops are now required for both professional and personal purposes.
Read more

Gold Loan And EMI Calculator: A Complete Guide

What is a Gold Loan? A gold loan is a secured loan offered by gold finance companies…
Read more
Become a Trendsetter
Sign up for Tric kingz Daily Digest and get the best of Tric kingz, tailored for you.

Leave a Reply