Rights and obligations of a guarantor

When it comes to buying a home or obtaining financing, a guarantor is a figure that appears more often than it may seem. Even so, it is not always clear what taking on that role entails or what exactly the rights and obligations of a guarantor are. If you have been asked to act as a guarantor or are considering this option, it is essential to have all the information before making a decision.

In this post, we explain clearly and without unnecessary technical jargon what it means to be a guarantor, what responsibilities you assume, and what rights protect you.

What is a guarantor and what role do they play?

Before getting into the details, it is worth clarifying what a guarantor is. A guarantor is the person who becomes liable for someone else’s debt if the main borrower fails to meet their payment obligations. In the real estate sector, this is particularly common with mortgages, when the bank requires additional security.

The guarantor is not the owner of the property or the holder of the loan, but they assume a very significant legal commitment. In the event of non-payment, the financial institution may claim directly from the guarantor, even before exhausting remedies against the main debtor, if this has been agreed in the contract.

Main obligations of a guarantor

Discussing the rights and obligations of a guarantor means starting with the less pleasant part: responsibilities. Being a guarantor is not a mere formality, but a commitment that can have significant consequences for your assets.

Covering the debt in the event of non-payment

The guarantor’s main obligation is to take responsibility for the debt if the borrower does not pay. This may include unpaid instalments, interest, fees, and even legal costs.

Putting personal assets at risk

If the guarantee is personal, the bank may claim against the guarantor’s present and future assets. In some cases, the guarantee may be joint and several, which allows the institution to pursue the guarantor directly without first claiming from the debtor.

Maintaining the guarantee until the debt is extinguished

Another common obligation is for the guarantee to remain in force until the loan is fully repaid. It cannot be withdrawn unilaterally, even if the guarantor’s financial situation changes.

Guarantor rights you should know

Despite the obligations, the guarantor also has rights that are often overlooked and can make a significant difference.

The guarantor has the right to know all the terms and conditions of the loan they are guaranteeing. This includes amounts, terms, interest rate, and possible contractual changes. Signing without understanding these points is a common mistake.

If the guarantor ends up paying the debt, they can subsequently claim those amounts from the main debtor. This right is essential, although in practice it may be difficult to enforce if the debtor is insolvent.

In some contracts, the guarantor may require the bank to claim from the debtor first before pursuing them. This is not always included; therefore, it is essential to review the contract carefully.

Difference between a guarantor and the loan holder

A common mistake is to think that the guarantor has the same role as the loan holder. This is not the case. The guarantor has no rights over the property or decision-making power over the loan, but they do assume risks similar to those of the debtor.

This imbalance leads many people to agree to act as guarantors due to family or personal ties without being fully aware of the real implications.

What should you review before agreeing to be a guarantor?

Before signing as a guarantor, it is important to take the time to review all the terms of the guarantee in detail. This is not just a formality, but a commitment that can directly affect your financial situation for years.

Some key points to analyse include:

• Whether the guarantee is joint and several or limited in time and amount
• The total amount of the debt you are guaranteeing
• The actual duration of the guarantee and when it ends
• The consequences in the event of non-payment
• Whether there is a possibility of cancelling the guarantee in the future

Understanding the rights and obligations of a guarantor is essential to avoid future problems. A guarantee is not just a gesture of support, but a decision with significant legal and financial consequences.

At Espígul, we know that every real estate transaction has its own nuances. That is why supporting you with clear information and professional advice is key so that you can make decisions with confidence and sound judgement, whether you are buying, selling, or acting as guarantor for a property.