Guarantor in a mortgage: requirements, responsibility, rights

What is a surety agreement

When applying for a loan for a large amount or to a borrower with a low credit rating or for some other reasons, banks often impose a condition on attracting a guarantor. In essence, a guarantee is an obligation of the guarantor to fulfill the loan obligations assumed by the borrower. Therefore, if the financial situation of the debtor worsens or he refuses to pay, all debts or part of them are transferred to the guarantor. Now he is obliged to repay the loan.

A surety agreement is concluded between the bank and the person who will assume such responsibility. If the loan amount is very large, such as with a mortgage, the bank may request not just one, but 2-3 guarantors. In this way, the lender reduces its risks. As a rule, if the principal debtor is in arrears, liability is not divided between the guarantors. The bank consistently appeals to each of them with a demand for full repayment of the debt. But if each guarantor was assigned a separate share, he will be responsible only for his obligations.

Regardless of how many guarantors were involved at the conclusion of the agreement, each of them bears joint and several liability on an equal basis with the borrower. This is stated in the Civil Code in Article 363. In this case, the lender has the right to demand payments from both the borrower and the guarantor at the same time. The obligations of both terminate only after the completion of loan payments. Sometimes it may happen that the guarantor completely closed the mortgage himself, while the borrower did not make a single payment.

If this situation occurs, the guarantor becomes the new lender for the borrower. The guarantor has the right to claim the entire amount that he contributed to the bank for the debtor. This is regulated in Article 365 of the Civil Code of the Russian Federation. In addition, the guarantor may demand that the borrower return other amounts spent on the loan - interest, fines, penalties that arose due to late repayment of the loan. If the guarantor does not want to fulfill the borrower’s obligations, he can go to court and demand that the debtor be forced to repay debts to the bank.

Responsibilities and rights

The guarantor has not only obligations, but also rights. Let's look at them in more detail.

The guarantor is obliged:

• Return the loan debt to the bank, as well as pay penalties, fines and interest due;
• Submit all documents requested by the financial institution before applying for a mortgage;
• Notify the lender in a timely manner about changes in address or passport information.

If the borrower simply disappears, the bank cannot demand payment of the mortgage from the guarantor.

The guarantor has the right:

• Recover from the borrower monetary compensation equal to the amount paid;
• Refuse to make payments on the borrower's obligations. In this case, the creditor will most likely go to court. Further developments depend on whether the loan recipient has property that the bank can take as payment for the debt. If this does not happen, the guarantor will have to repay the debt.

Difference between guarantor and co-borrower

Guarantors and co-borrowers are involved in almost all mortgage agreements. Sharing responsibility among several individuals allows the bank to reduce its risks. Sometimes the lender is ready to make concessions and reduces the interest rate on the loan if there are many responsible persons and they all meet the bank’s conditions. But there is still a difference between co-borrowers and guarantors:

1. The co-borrower is equal in rights and obligations to the borrower. The Bank does not differentiate between these persons based on their rights and responsibilities. For the credit institution, it does not matter which of them will repay the debt and to what extent. Most often, co-borrowers are spouses, parents or children of the main debtor for whom the mortgage is issued. If the debtor stops making payments according to the schedule on time, the bank automatically contacts both the borrower and the co-borrower to find out the reasons. They send him letters to email addresses, SMS or push notifications, or call him by phone.
2. The guarantor acts as a guarantor that the borrower will return the money lent to him by the bank. He is not obliged to monitor the fulfillment of obligations according to the schedule. If there is a delay of several days, no one bothers the guarantor. He is involved in the process when the debtor stops fulfilling his obligations and does not get in touch. As a result, the guarantor may become the main defendant on the loan. As a rule, the period for notifying the guarantor is specified in the guarantee agreement.

The contractual obligations of co-borrowers and guarantors in relation to the borrower also differ:

• the co-borrower signs the main agreement along with the borrower;
• The bank enters into a separate surety agreement with the guarantor, which he signs.

In addition, the co-borrower, at the same time as the borrower, signs an agreement on compulsory insurance of mortgage real estate. This is usually not required of the guarantor.

Another difference between a guarantor and a co-borrower is that he does not receive any rights to the main borrower’s property, which was purchased with a mortgage. Therefore, he has no financial benefits, only responsibility. However, the guarantor can sign a mutual agreement with the borrower, which states that the guarantor will become the owner of the home if he has to pay off the mortgage.

Everything you need to know about a mortgage guarantor

A mortgage guarantor is a citizen of the Russian Federation who assumes all obligations under the borrower’s loan agreement to the bank. When becoming a guarantor, you must understand: if the borrower does not repay the loan, you will have to repay the debt to the bank .

Who can become a guarantor for mortgage lending?

A natural or legal person can take on the responsibility of a guarantor . Most often, the borrower asks his blood relatives: sisters, brothers, parents, etc. to become his guarantor to the bank.

Who else can become a guarantor:

• spouse;
• friends, neighbors, colleagues;
• legal entities, for example, an employing organization.

Banks are most loyal to guarantees from legal entities . If you decide to take out a mortgage with a guarantor, then try contacting the management of your company. The lender will quickly approve such a guarantor.

Bank requirements for a guarantor

The conditions that banks impose on mortgage borrowers are very strict. The requirements for guarantors are no less stringent.

An ideal guarantor for a bank must meet the following conditions:

• age from 21 to 75 years;
• Russian citizenship with permanent registration in the country;
• permanent official income, documented;
• ability to make monthly mortgage payments;
• impeccable credit history.

Duties and responsibilities of the guarantor

The main obligation of the guarantor under the agreement of the same name is to fully repay the mortgage loan with interest, penalties and other charges, if the borrower cannot do this.

By violating its obligations, the guarantor is liable to the credit institution. This is property liability, which can be full (joint and several) or additional (subsidiary).

What is the responsibility of the guarantor:

1. Solidary . The bank contacts the guarantor to demand payment of the loan immediately after the borrower stops making payments. The credit institution contacts the guarantor and the borrower at the same time.
2. Subsidiary . The bank turns to the guarantor only after contacting the borrower has not resulted in repayment of the debt. If the lender was unable to contact the borrower, then he cannot demand that the guarantor pay the loan.

If the guarantee was issued for several people, property liability is not divided. Each of the guarantors is obliged to fulfill the bank's requirements under the guarantee agreement.

Rights of the guarantor

A guarantee in a mortgage provides for the transfer of the creditor's rights from the bank to the guarantor . That is, if you, as a guarantor, repay the borrower’s loan, then you become the mortgagee of his real estate or other property.

Documents proving your eligibility must be obtained from the bank. This is a loan agreement, a guarantee agreement, a certificate from the bank on debt repayment, an assignment agreement, payment documents (receipts for payment of payments).

To exercise the creditor’s right, in other words, to get your money back, you first need to contact the borrower in writing. In the application, indicate the full amount of the debt, including all payments, fines, penalties and interest on the loan.

Do not forget to write in the document about the terms and conditions of debt repayment, and also inform the borrower that if you fail to repay, you will be forced to resolve the issue through the courts . If the borrower ignored your appeal, then go to court.

When the court rules in your favor, which is most likely in the current situation, you will have to turn to the bailiffs. Their duty is to recover his property from the borrower. And only when the borrower’s apartment or other property is sold will you be able to get your money back.

Guarantee terms

The guarantee can be issued for a short or long term . In the first case, the guarantor is involved until the borrower pledges an apartment, house or other real estate to the bank. After this, the guarantor is documented to be removed from the loan agreement.

If the guarantee is issued for the entire term of the mortgage agreement, then during this period you can replace one guarantor with another . But this can only be done with the consent of the bank. It is worth noting that the guarantor cannot unilaterally withdraw from the guarantee agreement.

Who will be approved as a guarantor for mortgage lending?

Most often, mortgage guarantors are taken by those who have not become co-borrowers. They could be:

• parents;
• brothers, sisters;
• uncles, aunts, grandparents;
• friends, acquaintances, neighbors or colleagues;
• legal entities, for example employers.

One of the bank’s conditions for the guarantor, if it is an individual, is age compliance. As a rule, credit institutions set a range from 21 to 65 years. However, some banks may have different age limits, for example from 25 years to 75 years.

A separate requirement for the guarantor concerns citizenship. Without an internal Russian passport, a person will not be able to become a guarantor for a mortgage loan. Some banks impose restrictions on the place of permanent registration. For example, a guarantor can be registered only in the region where bank branches are present, while for others, permanent registration in any locality of the Russian Federation is sufficient.

The creditor bank will definitely check the solvency and credit history of the guarantor. Citizens with incomes less than that of the main borrower and with a more dubious credit history will not be able to act as guarantors.

In a number of cases, the joint and several liability of the guarantor can be replaced by subsidiary – additional liability. Or it may be limited by the amount or percentage of debt. All these conditions must be specified in the surety agreement. However, banks rarely practice such options.

Who is called a guarantor?

What does a bank guarantor mean for a mortgage? By law, this is a person who guarantees the timely repayment of the loan received and does not have any benefit in completing this transaction.

Attracting a guarantor significantly increases the likelihood of approval of a mortgage application and reduces the risk for the bank. A guarantee is not always a prerequisite for issuing a loan. If the borrower has a high level of income and is not married, he can apply for a mortgage without involving outsiders.

Who can be a guarantor for a mortgage? The guarantor can be either an individual (pensioner, individual entrepreneur, employee) or a legal entity (employing company) that meets the main requirements of a financial organization.

Banks are more loyal to borrowers whose guarantors are employers. This gives them confidence that the applicant will not be fired.

In what situations can you not do without a guarantor?

Without a guarantor, it is most difficult for a potential borrower to obtain a mortgage under the following circumstances:

• young age, for example up to 21 years, which is set by the creditor bank;
• pre-retirement age, which is close to the upper threshold approved by the bank;
• small arrears in the credit history of the main borrower;
• insufficient overall work experience or last job;
• purchasing housing in a new building for the period of construction and before registering the property as collateral with the bank.

If a potential borrower does not have sufficient income to obtain a mortgage, he will need co-borrowers. The high solvency of the guarantor will not play a significant role. It is necessary only in case the main debtor stops making payments, so the bank does not rely on the guarantor’s income. If the co-borrowers also do not have enough income to obtain a mortgage, the bank will not approve the requested amount. However, a guarantee will play a significant role if the credit history of the main borrower has been damaged by minor flaws.

At the same time, many Russian banks issue mortgages without involving guarantors. As a rule, the issue of guarantee arises if the borrower does not meet all the bank’s conditions.

Can the guarantor take out a mortgage for himself in the future?

Housing lending is characterized by long loan terms. If during this time the guarantor wants to become a borrower and take out a mortgage on himself, his level of income will be considered taking into account the guarantee. If your monthly income does not allow you to make payments on two loans, your mortgage will be denied.

Russian legislation does not contain rules regulating the possibility of purchasing housing using several loans, so if the guarantor’s income allows you to pay several mortgages, then you can safely contact the bank.

Liability of the guarantor to the creditor

Before agreeing to a guarantee, you should study in advance all the terms of the mortgage and the risks associated with such an obligation. The guarantor will have to:

• act as a guarantor for the repayment of the debt by the main borrower or fulfill his obligations if he stops making mortgage payments;
• repay not only the principal amount of the debt, but also interest and fines that will arise in case of delay if the borrower does not pay them;
• present all documents upon request of the bank - income certificate, passport, copy of the work book;
• notify the bank about changes in any of your data, for example, a change of surname or place of residence.

In addition to obligations, the guarantor has rights. He can:

1. Refuse mortgage payments for the borrower in court. However, if the debtor does not have property commensurate with the debt, the guarantor will still have to repay the loan instead of the borrower.
2. Go to court to collect from the debtor all payments that were made to the bank for the borrower.
3. Become a full-fledged creditor for the borrower, for whom the mortgage has been fully paid and the debt to the bank has been repaid.

Before concluding a guarantee agreement, the future guarantor has the right to:

• obtain information about the income and property of a potential borrower;
• find out the presence of hidden facts that may become an obstacle for the debtor in fulfilling his obligations to the bank;
• count on the legal purity of the transaction and involve your lawyer to clarify all the hidden nuances.

In order not to become a hostage to someone else’s irresponsibility or life circumstances, it is advisable to study all the obligations and rights before concluding a surety agreement.

If the guarantor promptly fulfills all the bank’s requirements to pay the debt, his credit history will not be damaged. The period must be specified in the guarantee agreement. But if the guarantor begins to make delays, this will ruin his credit rating.

What documents should the guarantor collect?

According to the legislation in force in Russia in 2021, the guarantor submits to the bank the same papers as the borrower.

The package of documents includes:

• Internal passport with a stamp confirming permanent registration, or a certificate of registration;
• Application form (can be downloaded from the lender’s official website);
• Birth certificates of children (for minors under 14 years of age);
• Military ID or certificate of exemption from service in the ranks of the RF Armed Forces (for men under 27 years of age);
• Marriage contract (if any);
• SNILS certificate;
• Work book (copy);
• Marriage or divorce certificate (if available);
• Death certificate of wife/husband (if available);
• Diploma or certificate of education;
• Certificate of TIN assignment;
• Certificate of income.

After all documents are presented and the application is approved, a separate agreement is concluded between the bank and the guarantor, which spells out the full extent of the latter’s responsibility.

Will the guarantor be able to get a mortgage or loan?

Mortgage is long-term lending. Over the course of 10-20 years, circumstances may change for both the main borrower and his guarantor. For example, a guarantor will want to take out a mortgage or a car loan. Not all guarantors clearly understand what the guarantee entails.

According to the law, the guarantor can submit an application to the bank for a mortgage, consumer loan or credit card. The borrower's obligations are not visible in his credit history. But this situation will persist only until the main borrower regularly fulfills its obligations to the creditor bank. If there is a delay, which is provided for in the guarantee agreement, all responsibilities will pass to the guarantor. In this case, he will have to pay for both loans - his own and the one for which he acted as a guarantor.

Not everyone will be able to bear such a financial burden. Therefore, it is better to find out in advance all the details and the expected load on the mortgage where the guarantee was issued. It would also be a good idea to control payments on someone else’s loan. Some banks allow guarantors to track payments. If such a function is not provided, you will have to rely on the integrity of the mortgage borrower, or not take on the responsibilities of a guarantor.

If payment obligations under the guarantee have already arisen, this will be visible in the guarantor's credit history. In this case, the bank will consider them as “its own”; debts. Therefore, a potential borrower may not be approved for an application for a larger amount, or he may be offered less attractive lending conditions.

What should guarantors pay attention to?

If you nevertheless agree to become a guarantor, before signing the agreement you must:

1. Make sure of the financial situation of the borrower, the availability of property that can be foreclosed on, and the borrower’s ability to pay the loan on time. You should not trust words in such a situation.
2. Carefully read all the terms of the guarantee agreement, preferably the loan agreement. If something is unclear, raises doubts, or seems too risky, show the contract to a lawyer rather than asking the bank or the borrower for details. The latter is interested in one question - to quickly obtain a loan and purchase real estate. Bank employees often conceal certain details in a conversation, the clarification of which may cause the guarantor to refuse to sign the agreement. These conditions do not necessarily contain anything contrary to the law, but they may, in case of certain problems with loan repayments, worsen the position of the guarantor or limit his rights.
3. If you have the choice of becoming a guarantor or a co-borrower, consider both options carefully. The co-borrower has more rights, and especially the right to claim real estate purchased on credit. Similarly, it is worth carefully considering the possibility of obtaining a mortgage on real estate with a share of the guarantor. This option is reasonable, legal and effective when the guarantors, co-borrowers, and borrowers are relatives planning to live together in a mortgaged apartment or house.

Guarantor insurance for mortgage lending

When applying for a mortgage, the borrower is required to pay for insurance of the property purchased with a mortgage. In addition, banks offer to insure other risks. The most common voluntary insurance options:

• from loss of title rights to property;
• life and health of the borrower.

They may also offer to insure against job loss or financial risks that will prevent the borrower from meeting mortgage obligations. In this case, the guarantor does not participate in the insurance process. He does not have to pay for insurance or take out an insurance policy for himself.

What is the difference between a guarantor and a co-borrower?

When issuing mortgage loans for long periods, banks attract so-called co-borrowers in addition to guarantors. This primarily includes the husband or wife, who is often a co-borrower by default. But they can also be other relatives: brothers and sisters, parents, grandparents (up to 5 co-borrowers in total). Each of them will contribute to paying the mortgage. This measure will strengthen the bank’s confidence in the main borrower and will provide a greater chance of timely payment and repayment of the issued loan.

At first glance, the terms “guarantor” and “co-borrower” are very similar:

• Both categories are required to take part in obtaining a loan;
• The banking agreement requires them to have the necessary certificates and documents (passport, income certificate, etc.);
• Their personal signatures must appear on all loan documents.

In addition to the similarities, there are also differences between these concepts:

1. Unlike the guarantor, the co-borrower is also a co-owner of the loan funds. Together with the main borrower, he has the right to spend the loan received. The guarantor does not have such an opportunity.
2. As a rule, there is a family relationship between the co-borrower and the main recipient of the loan, and not only acquaintances or relatives, but also any other persons can become guarantors.
3. Co-borrowers bear joint and several guarantees on an equal basis with the main borrower, paying the principal and interest on the loan. This means that any of the co-borrowers can pay the current payment.
4. The guarantor is responsible for the loan if the borrower stops servicing the debt.
5. When calculating the entire mortgage amount, the income of the co-borrower is taken into account. And the guarantor is simply a guarantor of the repayment of the loan, and does not affect the size of the future mortgage in any way.

After obtaining a mortgage, the main difference between the co-borrower and the guarantor will be what results each of them expects after fulfilling the obligations under the agreement:

1. Regardless of the type of liability (subsidiary or joint and several), the guarantor cannot claim to receive the property, even if it was paid for at his expense.
2. If the main borrower systematically makes late payments, violates the terms of the agreement, or refuses to pay the mortgage altogether, the bank can collect this debt from its co-borrower. And if he conscientiously fulfills the financial obligations under the contract, then the acquired property can be re-registered to him.

How to remove your mortgage guarantee

It will not be possible to terminate the function of a mortgage guarantor on the initiative of the guarantor himself. The legislation limits the right of the guarantor to unilaterally refuse obligations.

How to terminate a surety agreement →

The guarantee for mortgage lending is terminated in whole or in part in several cases:

1. Upon full repayment of the debt.
2. Upon expiration of the guarantee agreement.
3. If the creditor assigned the right to the borrower's debt without the consent of the guarantor. For example, transferring debt to collectors.
4. If the terms of the loan are changed without the consent of the guarantor. For example, when the interest rate increases or the loan term extends. In this case, the guarantor is liable under the contract on the original terms.
5. In the case when the borrower attracts another guarantor with an equal or higher level of solvency. This will require the consent of all parties - the original guarantor, the borrower and the bank.

The guarantee agreement is not terminated if:

• the borrower died;
• the legal entity was reorganized.

All rules for terminating a guarantee are prescribed in Article 367 of the Civil Code of the Russian Federation.

useful links

1. Civil Code of the Russian Federation Article 363. Liability of the guarantor.
2. Civil Code of the Russian Federation Article 365. Rights of the guarantor who has fulfilled the obligation.
3. Civil Code of the Russian Federation Article 367. Termination of guarantee.

about the author

Klavdiya Treskova - higher education with qualification “Economist”, with specializations “Economics and Management” and “Computer Technologies” at PSU. She worked in a bank in positions from operator to acting. Head of the Department for servicing private and corporate clients. Every year she successfully passed certifications, education and training in banking services. Total work experience in the bank is more than 15 years. [email protected]

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Is it possible to refuse a guarantee?

To find out how to get out of a mortgage guarantee, you need to refer to Art. 367 Civil Code of the Russian Federation.

According to this document, several cases can be identified that make it possible to terminate a guarantee agreement. These include:

• Changing mortgage terms without agreement with the guarantor;
• Expiration of the guarantee agreement;
• Termination of a loan obligation (that is, full repayment of the debt);
• Transfer of debt to another borrower (if the guarantor does not agree to be responsible for the new debtor). In some situations (for example, if the previous client loses solvency), changing the borrower can be quite beneficial, since it relieves the guarantor of problems associated with fulfilling the obligations assigned to him. It should also be noted that if the guarantor’s consent to transfer the debt is initially specified in the surety agreement, the procedure will be performed automatically.

The guarantor's obligations do not end with the death of the debtor . Moreover, if the heirs refuse the inheritance, the mortgage will immediately pass to the guarantor.

In order to at least slightly reduce the level of liability, he can use the insurance payment (if the borrower’s life was insured, and his death falls under the terms of the insurance agreement).

In all other cases, a citizen acting as a guarantor under a particular loan agreement must obtain the consent of not only the borrower, but also the credit institution. In addition, he is obliged to wait for a replacement, which also takes place only by agreement of all parties.

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Author of the article: Klavdiya Treskova

Consultant, author Popovich Anna

Financial author Olga Pikhotskaya

Who can be the person acting as a guarantor for repayment of the loan?

If one of the conditions for obtaining a mortgage loan from a bank is the involvement of third parties as guarantors, then the borrower will need to find a suitable candidate, since the bank’s decision will depend on this.

Any third party that meets the requirements of the financial institution can act as a mortgage guarantor. Since not every acquaintance will agree to take on such obligations, most often one of the borrower’s relatives is signed up as a guarantor.

As in the case of the borrower, the requirements for the guarantor may differ from bank to bank , but in most cases they are as follows:

• age not younger than 21 years and not older than 65 years;
• availability of sufficient monthly income, which has documentary evidence;
• good credit history;
• Russian citizenship and permanent registration at the place of residence.

What will happen to the mortgaged property if the borrower goes bankrupt?

According to statistics from the Central Bank of the Russian Federation, more than 1/3 of debtors under mortgage agreements fail to meet their obligations. Life situations can be so unpredictable and unexpected that no mortgage debtor can 100% guarantee their fulfillment.

The bankruptcy of a mortgage borrower, as well as the bankruptcy of one of the mortgage co-borrowers, cannot but affect the collateral real estate. Financial insolvency deprives debtors of their right to mortgage housing.

Important to remember! If the mortgage borrower has already been declared bankrupt by a court decision, then he is obliged to notify the bank about this before signing the mortgage agreement. Otherwise, concealment of such a fact may serve as grounds for early termination of the contract.

Numerous judicial practice has shown that in case of improper fulfillment of the law and obligations on the part of the borrower under the mortgage agreement, the bank can foreclose on the collateral property, even if it:

• is the debtor’s only home;
• registered for minor children;
• designed for disabled people.

This approach to mortgaged real estate is due to the fact that it does not belong to the debtor until it is fully redeemed. For the duration of the mortgage agreement, the subject of the agreement - real estate - is pledged to the bank and is the guarantor of the return of funds under the agreement.

If the co-borrower(s) or guarantor(s) pay the borrower's obligations under the mortgage agreement, then the bank does not have the right to terminate the agreement and put the mortgaged property up for auction.

In case of financial insolvency of the main debtor, the obligations under the mortgage agreement are automatically transferred to the guarantor. However, by this time the guarantor may also be unable to pay debts for the mortgage borrower. What should a guarantor do in such situations? In this case, the guarantor also has the right to file an application to the arbitration court to declare himself bankrupt.

Important! The bankruptcy of the borrower and guarantor has its own sequence. At the same time, they cannot apply for bankruptcy.

The guarantor has the right to apply to the arbitration court with a statement of his financial insolvency only after:

1. the borrower stopped paying the loan;
2. the bank, based on a court decision, redirected monetary claims for mortgage lending to the guarantor;
3. bailiffs, in accordance with the law, initiated enforcement proceedings against the guarantor;
4. the amount of debt, including the remaining debts of the guarantor, is more than 500,000 rubles.
5. the guarantor has been in arrears for more than 90 days;
6. the total amount of income and property of the guarantor in monetary terms does not satisfy the requirements of all creditors.

Thus, the law gives the guarantor the right to apply to the court to declare himself bankrupt if the guarantor’s position meets all of the above requirements. True, sometimes you can file for bankruptcy even when the debts have not reached the amount of 500 thousand rubles, but when a person clearly understands that he cannot pay them. For example, he lost his job and hasn’t been able to find it for a couple of months, so he has nothing to pay him with.

If you find yourself in such a situation, contact our specialists for legal support. They will help you correct the situation with minimal losses.

The bankrupt co-borrower is sinking worse than a rock

The bankruptcy of a co-borrower on a mortgage threatens to leave the family homeless. Because a co-borrower is involved when the borrower’s income does not allow him to “delay” the loan payments himself. Often, the bankruptcy of a co-borrower is followed by recognition of the financial insolvency of the main borrower.

Restrictions on the rights of a co-borrower in a mortgage agreement

Despite the fact that the rights, duties and responsibilities of the main borrower and the co-borrower(s) under the mortgage agreement are equal, some differences still exist.

For example, the main borrower has the right to demand the withdrawal of the co-borrower from the mortgage agreement. The co-borrower(s) are deprived of this right.

For example, the spouses divorced, and the former spouse, being the main borrower, wished to remove the former spouse from the mortgage agreement. To do this, you need to contact the bank with a substantiated application and a corresponding list of documents. The co-borrower spouse does not have the right to demand that the spouse be removed from the agreement.

If you are facing bankruptcy of your co-borrower-husband on a mortgage, then you need to promptly contact specialists for advice. This is the only way you can avoid unwanted consequences for yourself.

Or another situation: the co-borrower (or one of the co-borrowers) showed signs of insolvency (got disabled, quit his job, the company where the co-borrower worked closed, etc.). In this case, the main borrower should be concerned, since his property, which is pledged to the bank, may be irretrievably lost.

In addition, the main borrower has the right:

• contact the bank with an application to replace the co-borrower, provided that the rights and legitimate interests of the co-borrower are not violated. The law did not grant such a right to the co-borrower;
• repay your debt amount ahead of schedule, while the co-borrower cannot do this without meeting the following condition: the main borrower has issued a general power of attorney for the co-borrower with a notary.

The main advantages of a mortgage with a guarantor

A cosigner is a loan guarantor who agrees to repay the mortgage loan if the title borrower fails to do so. In other words, this is a person who risks losing his wealth by being responsible for the actions of the borrower and not having rights to the purchased property.

A mortgage with a guarantee has many advantages for the borrower:

• the possibility of obtaining a loan to a young family or people at pre-retirement age;
• a significant increase in the chances of approval of an application for clients who have a small income or frequently change jobs;
• the opportunity to improve their living conditions for clients with a low credit rating;
• getting a lower mortgage interest rate. This is due to the fact that the bank’s risks are reduced after attracting a guarantor. He can offer the client more favorable lending conditions.

At the same time, the amount of the guarantor’s income will not affect the change in the amount of the mortgage loan if it does not suit the main borrower.

The financial institution also receives a number of benefits from including a guarantor in the loan agreement:

• additional guarantee when working with clients who do not inspire much confidence, but want to improve their living conditions with the help of a mortgage;
• the possibility of repaying the loan if the borrower becomes insolvent.

Despite the obvious advantages of concluding a mortgage with the participation of a guarantor, banks try to rarely use this option. Today, a guarantee is a deviation from the norm, signaling that the borrower has serious problems.

Major financial market players VTB and Rosselkhozbank do not enter into agreements with the participation of third parties. Sberbank allows their presence in the contract until the transfer of real estate as collateral. This is due to a high degree of risk for the guarantor himself.

What are the consequences of the bankruptcy of a co-borrower on a mortgage for the main mortgagor?

Increasingly, our clients come to us with the question of what to do if their co-borrower or one of the co-borrowers on the mortgage has applied to the court to declare him financially insolvent (bankrupt). As the practice of the arbitration court shows, the bankruptcy of a co-borrower creates a number of difficulties for the borrower and not only for him.

The borrower must be prepared for the following:

• creditors begin to demand termination of the contract or its early repayment. As mentioned above, for the lender, the bankruptcy of a co-borrower is a deterioration in the conditions for ensuring the repayment of the mortgage loan;
• the lack of sufficient funds from the borrower or the second co-borrower to repay the debt of the bankrupt co-borrower gives the creditor the right to put the pledged property up for auction.

Advice from an expert: if a co-borrower shows signs of financial insolvency, the main borrower under the mortgage agreement must immediately apply to the court with an application to replace the co-borrower or withdraw him from the mortgage agreement.

In the event of bankruptcy of a co-borrower under a mortgage agreement, it is advisable to contact the bank with an application to replace him before he applies to the arbitration court with an application to declare him bankrupt. Otherwise, the lender interprets the bankruptcy of the co-borrower as a worsening of the conditions for ensuring the repayment of the mortgage loan, and he has the right to terminate the agreement ahead of schedule.

Do you need to write an application to replace a co-borrower or remove him from the mortgage agreement? Our specialists are ready to help you at any time convenient for you.

Important! If a co-borrower under a mortgage dies, his obligations pass to other co-borrowers or to his heirs. In the event that they enter into an inheritance.

Very often women come to us asking what to do if a co-borrower-spouse goes bankrupt on a mortgage? In such situations, the creditor has the right to demand through the court to foreclose exclusively on the property of the co-borrower spouse. If the total value of the property of the debtor spouse does not pay off the total amount of debt, then jointly acquired property may also be subject to collection. In this case, the share of the debtor spouse is separated from the total amount of jointly acquired property.

As you can see, the bankruptcy of a spouse’s co-borrower on a mortgage will not pass without leaving a mark on your common property.

Call, and our specialists will do everything possible and impossible to protect your interests.

Often in practice both spouses become bankrupt. In this case, they are both liable under the mortgage agreement. Such spouses should remember that such a situation is a stalemate.

Risks

What risks should a person signing a guarantee agreement remember? Can the guarantor take on a mortgage loan in the future? Before agreeing to sign a surety agreement, it is necessary to determine all the pros and cons of such a decision. A guarantee is not a simple formality, but a serious obligation to the bank. A person who agrees to become a guarantor under a mortgage agreement may face the following risks:

• damaged credit history, if a person refuses to pay a debt if the borrower does not fulfill his obligations under the contract;
• difficulties in obtaining a loan in your name;
• financial responsibility for the borrower's debt;
• confiscation of property (rarely happens, but the possibility is not excluded).

The bank has a need to require the involvement of third parties as guarantors for the mortgage if the solvency of the client himself remains in question. The presence of guarantees, of course, increases the chances of approval of a loan application , but this kind of agreement is associated with the emergence of serious obligations to the bank on the part of the person who signed the guarantee agreement.

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