If you’re going to rent a property to live in, then you may be asked to provide a guarantor. Having a guarantor can make the difference between being able to rent a property and not being accepted to do so, and thus it can be very important.
The following guide will outline all you need to know about guarantors for renting. We answer your frequently asked questions, from whether your retired parents can be guarantors to whether or not your guarantor will need a credit check. Read on to discover all the information you need if you want to find – or become – a guarantor for renting.
Guarantors for renting – top 10 questions answered
1. What is a guarantor?
The clue is in the name: a guarantor is in place to guarantee that the landlord will receive their rental income. If the tenant doesn’t pay the rent, then the guarantor is expected to step in and pay it instead.
When someone signs on the dotted line as a guarantor for renting, they are in essence agreeing to pay the rent if the tenant fails to. In fact the guarantor can be taken to court if they don’t pay up. So in theory at least, they do stand to lose their own assets.
2. Why would someone need a guarantor?
There are various reasons why a letting agency or landlord may request a guarantor. A common one is where the tenant has no credit history. This often applies to younger people, or those who haven’t resided in the country for long.
A guarantor may also be required if the tenant receives a relatively low salary, or has recently started a new job. Sometimes a guarantor will also be required because the tenant’s credit score isn’t high enough for them to be accepted otherwise.
3. Who can be a guarantor?
So can a guarantor be a parent, and in fact does a guarantor have to be a family member? In theory, just about anyone can be a guarantor, and the answer to can a family member be a guarantor is a definite yes.
A spouse can also be a guarantor, assuming that both partners have separate bank accounts. However, someone should only sign up to be a guarantor if they fully trust the tenant.
The guarantor should also be both able and willing to cover the rent in the event that the tenant could not do so. In reality, then, the guarantor and tenant would need to be open and honest with one another about their finances.
A guarantor does not have to be related to the tenant. In reality though, parents or other close family members are most likely to agree.
4. What qualifies someone to be a guarantor?
Who will be accepted as a guarantor does depend on the landlord or rental agency concerned. A guarantor will normally have a separate bank account to the tenant and be over 21 years of age. They will also need a good credit history.
5. Can a guarantor live at the same address?
A guarantor can live at the same address as the tenant, though they should have a separate bank account. The role should not put too much stress on the finances of the guarantor, so they will need to demonstrate that they could cover any potential costs if needed.
6. Does a rent guarantor have to be a homeowner?
A rent guarantor doesn’t necessarily have to own a property, including their home, but they will need to demonstrate that they have sufficient funds to cover the rent if required.
Though a guarantor doesn’t have to be a homeowner, being one can go a long way when it comes to showing they could cover any costs the landlord may need to recover.
7. How much does a guarantor need to earn?
While exact requirements vary by letting agency and landlord, a guarantor will often need to have an annual income that’s at least three times the annual rental for the property. The amount is thus determined by the rental sum rather than an absolute figure.
For example, to act as a guarantor for a property with a monthly rent of £1,000, the required guarantor income is likely to be around at least £36,000 plus. This is based on three times the annual rent of £12,000.
8. What can you do if you can’t get a guarantor?
If you’re asked to provide a guarantor, but cannot get one, there may be other acceptable ways of guaranteeing the rent will be paid. Paying six months’ rent in advance is an option the landlord or rental agency may feel more comfortable with, for instance.
Handing over a larger deposit may also be acceptable, as holding more funds may increase the landlord’s sense of security. The agency or landlord may not accept either of these options, however – it’s down to their discretion. Paying a large sum like this may also be impossible for the tenant who cannot access the funds required.
9. Is a guarantor credit checked?
As a guarantor needs to pay the rent if the tenant cannot, they should expect a credit check. Often this is a ‘soft’ credit check. A soft credit check won’t be shown to other companies and should thus not affect the guarantor’s credit rating.
10. Can a parent be a guarantor for a mortgage?
As with renting a property, a parent may also be asked to act as a guarantor for a mortgage. This works in a similar way to with a rental property, as the guarantor is expected to cover repayments (rather than rent) if the buyer cannot.
Parents are often asked to be guarantors. This is because there is usually a high level of trust between grown-up children and their parents. They may also be homeowners, have a good credit score and have a decent income, all of which fit the ideal profile for a mortgage guarantor.
Whether you want to buy or rent, why not check out the current list of attractive properties Stanfords has to offer in southeast London?