Mortgage credit: How to stop being a guarantor?

Problems with housing credit? Savings Minute credit intermediaries solve it in the blink of an eye. Resort to free services here, or keep reading to learn how you can stop being a guarantor of a housing credit.

What does it mean to be a guarantor for a home loan?

Being a guarantor for a mortgage implies being responsible for the borrower's debt if they fail to pay it. In other words, it is a burden if the original borrower defaults.

However, many guarantors accept this position without knowing, by law, what it means, what the consequences are, and what their rights are. Later on, they find themselves wanting to get out of this responsibility and the bank does not accept.

Therefore, it is important to be informed in advance about what it means to be responsible for the bail of another debtor.

Before agreeing to be someone's guarantor, you should consider whether the debtor is able to settle the debt and whether, if the debtor fails to make payments, you have the financial capacity to take responsibility.

Know that, as a guarantor, you are exposed to various risks such as: having your salary pledged, having your name on the Banco de Portugal's blacklist, or having greater difficulty in contracting other credit of your own.

What are the rights of a guarantor?

But, as a guarantor, you also have rights! According to civil law, when taking on someone else's debt, you have the following rights:

• Subrogation in creditor's rights and right of recourse - if the guarantor pays off a debt to the creditor, in case of default by the debtor, they become subrogated in the creditor's rights. This allows them to demand from the debtor the full amounts paid to the original creditor for substitution.  
• Benefit of prior excussion - it is the right not to settle the debt if the creditor has not yet mortgaged all the debtor's assets. However, this clause is not usually found in credit contracts.
• Term benefit - represents the debtor's right to settle the debt by the end of the contract term, with the creditor unable to demand early payment. However, if there is a default in the payment of one of the installments, this right loses its effect. In other words, the debtor loses the right and the creditor can demand payment of the remaining debt.

How to stop being a guarantor?

To stop being a guarantor for a mortgage loan, it is necessary for there to be agreement between the borrower and the bank. However, the probability of the bank refusing is high, since a guarantor is a guarantee that banks have in the face of debt, not wanting to waive it.

In case of bank refusal, another solution to stop being a guarantor is for the debtor to transfer their mortgage to another banking institution.

In this case, it is simpler to access different credit conditions, and remove the guarantor from their position. This is because it may be possible to lower the monthly installment of the credit, and consequently the effort rate. This eliminates the need for a guarantee.  

And why is it possible to have a lower installment at another bank? For various reasons, as you can change the interest rate regime, extend the contract period, or reduce the spread by contracting other financial products in compensation. So, in this case, the transfer of home credit can be beneficial in several ways. But, essentially, by being able to remove a guarantor from the credit.

By opting for a housing credit transfer, it may make sense to ask for help from a credit intermediary to negotiate new credit conditions. The intermediaries of Poupança no Minuto offer a free and fast service, which can accompany the entire process until the credit is transferred to another bank and you are no longer guarantor.