Change is a part of life that we all have to deal with. However, it is often hard to handle change that has financial implications. That may be especially so if a situation involves, not just your own finances, but those of someone else too. Becoming a guarantor can be a great way to help someone who has had financial issues or who wouldn’t have been able to get a loan without your help. But there may come a time when this is an obligation that you just don’t want anymore.
Can I remove myself as a guarantor?
There is no straightforward answer to this, as it will depend on what you are guaranteeing as well as the circumstances of the guarantee. If you have reached a point where you no longer want to be a guarantor then the first step is to locate all the original documents and see what your obligations are. You may then need to sit down with the person whose obligations you are guaranteeing to talk about the future.
Can you remove yourself as a guarantor on a loan?
The short answer is no. If you have agreed to guarantee repayments on a loan then you will only stop being a guarantor when there are no more repayments to make.
How to remove your name from a guarantor loan
There is only one way to ensure that you don’t have any ongoing obligations under a guarantor loan and that is to make sure that the loan is paid off by the borrower. Most guarantor lenders won’t release a guarantor from their obligations if there is any amount still outstanding. You can speak to a lender and ask how to remove your name from a guarantor loan but the most common answer is likely to be “pay the loan off.” Once the loan is paid off you can be released from the guarantee.
How to remove yourself as a guarantor for a mortgage
Although a mortgage is basically just a very large loan the process for removing a guarantor from a mortgage is rather different than for another type of loan. Although the mortgage term may be 25 – 30 years when it was first entered into, most homeowners will aim to remove a guarantor within five years to reduce the amount of paperwork involved and attract better rates. If you have supported someone else in obtaining a mortgage in this way there are a number of steps involved in how to remove yourself from being a guarantor:
- Obtain a valuation on the property. This will be necessary to establish the Loan to Value Ratio (LVR) i.e. the percentage of what is left to pay on the mortgage against the value of the property. Removing a guarantor from a mortgage often means ensuring that there is enough value in the property so that the guarantor is no longer required.
- Some lenders will allow a guarantor to be released when the LVR reaches 80%.
- If LVR is not at 80% (or whatever the lender’s threshold is) then you’ll need to go through the process of an internal refinance to release the guarantor and this will usually mean getting approval from the lender’s insurers.
Can a guarantor be removed from a tenancy?
The best way to remove a guarantor from a lease will depend on the wording of that lease. If the guarantor’s obligations are limited to a specific time period – or to the point at which the lease comes to an end – then a guarantor is automatically removed when the lease is no longer in effect. What is more difficult is how to remove a guarantor from the lease if the lease is ongoing. This will usually require the agreement of the landlord. The landlord may specify that if one person is being removed as a guarantor from a tenancy then a replacement guarantor will need to be found. Some landlords will agree to release a guarantor in return for up front payments of rent. Other landlords will not agree to release a guarantor at all until the tenancy has come to an end.
In any situation where you are looking at how to remove yourself as a guarantor, whether it’s from a loan, a mortgage or a tenancy agreement, it’s important to go back to the original documents. Every situation is different and each guarantee will have different wording. Most will not make it easy for a guarantor to be released if there is still an ongoing obligation. So, if you want to remove your name from a guarantor loan – or other document – you will need to know what your obligations are, when they come to an end and you may also need to negotiate in order to get what you’re looking for in terms of bringing the arrangement to a close.