Does becoming a guarantor affect your borrowing limit?

Hi,

If I become a guarantor for a relative's loan, does becoming a guarantor affects my own lending capacity for my own loans?

Would becoming a guarantor shows up on my credit report?

Thanks

 

Being a guarantor places your financial health at risk. It's something that I would personally not do.

Get some legal advice. The risks can be financially devastating.

The risks of going guarantor on your children's home | The New Daily

 

Yes and yes. For the guarantee amount. Usuaully about 25% of the kids purchase price.

 

Yes.. cause you have to declare what the loan is and repayments are.
If the property needs to be sold for less than the loan, you pay the difference.

Seen lots of probs in wa with relationship splits and parents having to come up with cash to pay out the remaing loan.

Yes should show up on your credit report.

 

I would say no.

A security guarantee means you are not liable for the payments of the loan directly. Your property has been mortgaged as security for someone else's loan.

 

Agreed. The fact that quite a few lenders do not require guarantors to demonstrate serviceability of the guarantee portion supports the premise that the guarantor doesn't actually have to pay back the guarantee in the event of a problem.

 

Goverment new policies now impose much higher financial requirements on the guarantors of new migrants to Australia. Will this have similar impact as other forms of being a guarantor do?

 

I'm not sure what you're talking about in terms of higher financial requirements? For lending purposes, if you have permanent residency or citizenship, new immigrants enjoy the same requirements as everyone else.

If you are not a permanent resident or citizen, then it is extremely difficult to get finance and if a guarantor needed to be involved, it's probably almost impossible.

 

The requirements are for Australian permanent residents (PR) or citizens wishing to be a guarantor for a new PR visa applicant. For example, I am being asked by a friend to become a co-guarantor for their overseas parents visa application since they can't meet the requirement (income threshold) in their own right.

 

I think we're talking about quite different things. Guarantors for finance and qualifying for permanent residency are completely different topics.

 

Yes, hence my question

 

I don’t know first hand, but I’d be surprised if being a migrant guarantor impacted lending capacity.

It doesn’t show up on the credit report and it’s not asked about in the lenders application, so lenders wouldn’t know to include it. And then they would need to form a committee and decide if they do need to include it in their calculator.

 

Basically, in assessing whether the guarantor meets the income threshold requirement the visa applicant is viewed as an additional dependant (or even more than that). The process is carried out by the Department of Human Services via Centrelink.