Guarantor question

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    Guarantor question

    My daughter is self employed and needs a guarantor to rent a flat. We are semi-retired, still running a small limited company as a top up to pensions - state pensions plus annuity. Would we be considered as guarantors as we are not in full time employment? We are mortgage-free, owning our own home plus a flat (also owned outright) which provides us with additional rental income as well as substantial savings. The only information I can find is that a guarantor's salary should be at least 40% of rent guaranteed. We meet this criteria but it isn't from salary. I don't know if savings and assets are taken into account for guarantee. As a landlord I would accept such a guarantor but I don't know what rules generally apply. I would appreciate any advice.

    #2
    It will completely depend on the LL/LA. You'll have to find out directly from the LL/LA. Traditionally, it would need to be 40% of rent guaranteed. Sounds stupid, especially considering you own two significant assets plus have a healthy stream of income. But the purpose of the '40%' is to comply with the terms of the 3rd party reference guarantee insurance.

    Equally as frustrating from the T's presepective--because the T could prove £1mil in cash but if the T has £0 in income, they'll either need to be paying up front or get guaranteed. Which is a bit strange because its not like a LL is going to start garnishing wages, and the T could spend their income quicker than their £1mil in cash. But such is life.

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      #3
      If you are self employed then you are eligible to be considered as a Guarantor , if you pass the necessary credit referencing that a good managing agent should be undertaking on behalf of the Landlord then no issues would be raised , if as Tzone has said if there are issues , offer to pay a sum equivalent to x months rent , but on the understanding that is is placed in the Deposit Protection scheme , for the Landlord this is a no brainer and would be adequate to cover any arrears and any possible damages.

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        #4
        Thank you for you replies. Income from our employment together with pensions and rent from our property makes up our income stream and I'm just concerned about credit referincing flexibility.Do I understand your suggestion correctly that the sum equivalent to x months rent would actually be an additional deposit? Might it not be acceptable to just pay x months rent in advance or are there legal implications with this?

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          #5
          It just needs to be documented clearly as being rent not a deposit.

          A deposit is a sum that might be used in future and remains the property of the tenant, rent is rent and belongs to the landlord.
          So if you paid six month's rent in advance with the next payment in month seven, that's usually fine.
          Some people try and cover all the bases by paying (say) 6 months in advance and then paying monthly from the second month (leaving the five other advance months as a "reserve");
          in that case the five months is probably really a deposit and should be protected etc.

          It's really a question of what the landlord would need to feel comfortable.
          When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
          Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

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            #6
            It may be that the "system" is not flexible enough for you to be guarantor.

            When DH and I were looking (my income more than covered the rent, but we were moving to be closer to the uni campus he was about to do a Masters at) 3 years ago, we needed a UK based working guarantor who owned their own home and who earned more than £30k per annum.

            This ruled out almost everyone we knew - my parents are either dead or not around; his parents (although considerably wealthy and more than willing to be guarantors) have retired to Sunnier Climes so aren't working and don't own UK property; my aunt & uncle (godparents) earn enough in pension income and own their own home but pension income didn't count - only salary - so weren't suitable. In the end, DH's cousin and her husband were suitable (but then we had the issue that he was a Director at one of the Big 4 Accountancy Firms and, as such, doesn't get a "salary") - it took about 6 weeks to sort out because everything was "computer says no".

            In the end, we offered to pay 6 months up front because it was getting close to be able to move before his course started; fortunately someone at the referencing company saw sense and we didn't have to.

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