Solicitor’s Certificate - Mortgage Guarantee

Written by Omruye Koyu

Who is a guarantor?

A person that gives or acts as a guarantee.

Who is a borrower?

A person or organization that takes out a loan from a bank under an agreement to pay it back later, typically with interest.

What to expect when giving a guarantee?

When you become a guarantor to a mortgage, you essentially give an undertaking that you will pay the borrower’s loan should they default under the mortgage. In addition to strengthening a loan application, a guarantee will also mean that the borrower could avoid paying mortgage insurance, as this will generally be waived when additional security is provided.

However, agreeing to be a guarantor requires careful consideration and it is important to understand that you will be primarily liable if the borrower fails to meet their loan obligations. In the event that the secured property is repossessed and sold, the proceeds would need to cover the amount due in addition to any enforcement expenses. Where there is an outstanding balance, the creditor can bring proceedings against you. As the guarantor, if you are unable to pay the overdue amount, the lender could proceed to sell your assets.

Some guarantors have previously avoided responsibility by claiming that the document had not been clearly explained to them or they were forced to sign the guarantee against their will. As a result, many banks and financial institutions now require assurance that you understand the full effect and implications of the guarantee.

A certificate of independent legal advice or ‘Solicitor’s Certificate’ confirms that a lawyer has advised you of the potential liabilities and risk involved. By obtaining this certificate, a bank will also assume that you have received comprehensive advice and were not misled or pressured into signing a guarantee.

What should you do?

We highly recommend that you obtain independent legal advice before you proceed with signing any mortgage document and becoming a guarantor. That way, you will fully understand the nature and effect of the documents. Please contact our office should you require any assistance. We will review your loan documents and provide carefully considered advice. It is our priority to ensure you are well informed before issuing a certificate.