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Essential information for guarantors
The following information is important if you:
- Intend to act as a guarantor for a mortgage for another person
- Intend to offer your property, or other security, as collateral security for a mortgage for another person
The Cambridge recommends that you take independent legal advice before entering into an agreement to make sure you understand your commitment and the potential consequences of your decision.
You should not agree to act as a guarantor unless you are able to meet the payments for the borrower’s mortgage after you have satisfied your own budgetary needs. A mortgage is a long-term debt so you must also consider what future commitments you may undertake and how they may be affected by the guarantee which you will be giving.
If you are to act as a guarantor:
- Should the borrower whose mortgage payments you are guaranteeing default on all, or part, of his or her payments, you will be required to make the payments to The Cambridge. Failure to make payments when required could result in legal action being taken against you
- The guarantee which you give will be for the duration of the mortgage. The Cambridge may, however, be prepared to release you from your guarantee if it is satisfied that the borrower is able to sustain payments without your support
- The Cambridge will assess your suitability to act as a guarantor by reviewing your financial circumstances. You will be required to give The Cambridge permission to seek any references which it may require and to search the files of any credit reference agency which will keep a record of that search
- Entering an arrangement by which you are committing yourself to repayment of a debt needs your careful consideration
If you are offering property as collateral security:
- The Cambridge will take a first charge on the security offered
- In the event of default by the borrower, any loss incurred by The Cambridge can be recovered by calling on the collateral security. In the case of property, The Cambridge can take legal action to obtain possession of your property and sell it to recover the money it is owed. THIS MEANS THAT YOUR PROPERTY, WHICH MAY BE YOUR HOME, IS AT RISK
- Your ability to sell your property will be restricted by a collateral charge
- The Cambridge may agree to release collateral security if:
- the value of the borrower’s property has increased to an amount at which The Cambridge is satisfied that it will provide adequate security for the amount of the mortgage,
- the mortgage is reduced to an amount for which the value of the principal property provides adequate security,
- suitable, alternative collateral security is offered,
- the loan is surrendered.
If you offer money as collateral security for a mortgage:
- The amount required will be held in a savings account of your choice with The Cambridge (current Government rules for certain tax-efficient savings accounts, including stocks and shares ISAs and cash ISAs, exclude those savings accounts from being used as security for a loan)
- The passbook for the savings account will be held by The Cambridge
- The savings account will only be in the name(s) of the guarantor(s)
- You will be entitled to receive or withdraw the interest earned by the savings account
- You will not be entitled to withdraw all or part of the original balance unless The Cambridge is satisfied that the mortgage debt is adequately secured by the principal security and/or The Cambridge is also satisfied that the borrower is able to sustain payments without your support
- You could be restricting access to your money for some time as a mortgage is a long-term debt. You should, therefore, assess what future demands you may need to make on your investment. THIS MEANS THAT THE MONEY YOU OFFER IS AT RISK
Any valuation, legal or other fees incurred by The Cambridge for the acceptance and assessment of a guarantor or collateral security will be the responsibility of the principal borrower, the guarantor or the owner of the collateral security.
Limit of guarantee
The amount of the guarantee, provided by a guarantor or by collateral security, will be limited to the amount of the advance, any unpaid interest and costs incurred as a result of possession proceedings. An unlimited guarantee will not be taken.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE