Steps to Writing a Guarantor's Letter
Jorina Fontelera reports:
"Whether signing as a guarantor for an apartment or a mortgage, you must do your due diligence to find out exactly what you would be responsible for should the tenant or borrower fail to comply with his lease or mortgage. Some leasing agents simply require you to fill out the guarantor form or sign the contract after submitting all evidence qualifying you as a guarantor, while others require a written letter from you as well. While it is extra work, writing a guarantor’s letter gives you the chance to spell out exactly what you would be responsible for and when, which helps ensure all parties are on the same page...Read the requirements to be a guarantor as they vary between landlords and lenders...Figure out if you have the qualifications based on the requirements. Many landlords require the guarantor to have an annual salary 70 times the amount of the monthly rent, along with owning a home and having good credit. Tenants usually need a guarantor when they don’t make the salary minimum whereas on the mortgage side, guarantors are typically required because the borrower does not have a high enough credit score. To prove you qualify, you’ll need to provide tax returns; a list of assets and liabilities; and pass a credit check...Know who you will guarantee and be certain he will pay the rent or mortgage on time, for the duration of the lease or loan. Do not get pressured into being a guarantor if you cannot afford the fallout. Write the letter and sign the guarantor agreement only if you're absolutely certain you can handle the obligation...Date the letter then state your name and address; the landlord or mortgage lender’s name and address; and the property that is being rented or bought, and by whom...Write out your qualifications as a guarantor -- your income, assets and other personal details supporting why you would be able to take responsibility should the tenant or borrower fail to do so. You can also list your accountant to testify to your financial state, as well as other character references...Write out what you would be responsible for and when. You can usually pick up this language from the lease or mortgage agreement. State that if the responsible parties refuse to pay, you will pay what they would’ve been responsible for per the lease agreement or mortgage. If other expenses arise as a result of the tenant or borrower defaulting, you should also clarify whether you will pay for those...Declare that you accept this responsibility as well as give the landlord or lender the right to conduct a thorough check on your background...Print your name at the end of the letter and sign beneath...Make copies of the letter for yourself, the tenant or borrower, and your lawyer and financial advisor, if you have them...Consult with a real estate lawyer who isn’t part of the real estate transaction, to ensure that everything the landlord or lender is requiring of you before and after you are deemed the guarantor to be legal. Consider getting creditor insurance in case you do end up on the hook. You might also consider making a contract with the tenant or borrower saying how he would pay you back in case you have to pay the lease or mortgage in his stead...Being a guarantor may make it difficult for you to get your own loans because some lenders may look at your commitment as a liability and therefore not qualify you for a loan."
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