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What is a Guarantor?

What is a guarantor?

If you’ve ever rented a home before, you’ll know that you need to go through referencing first. One term that pops up quite regularly during this process is “guarantor”. So what is a guarantor and why are they needed? Well, let’s go through it in detail, starting with referencing.

Referencing checks

Referencing checks involve looking at factors such as your:

  • Current employment
  • Current income
  • Employment history
  • Address history
  • Landlord references
  • Credit score

This whole process is there to check that you’ll be a good tenant and can comfortably afford the rent.

Most renters will need to earn 2.5x the total annual rent in order to pass referencing. So if the rent is £2,000 per month, that’s £24,000 per year. So you would need to earn £60,000 per year (as a household) to pass referencing.

You’ll often need to have a stable employment, have a good credit score and — usually — be a UK resident.

Common scenarios where applicants fail referencing checks include when they are:

  • Earning less than 2.5x the rent
  • A student without an income
  • Self-employed without a stable income
  • A foreign national
  • In the red with their credit score

But this doesn’t mean that you have to walk away from your dream rental. All is not lost as there is a solution for anyone who fails a referencing check: a guarantor.

What is a guarantor?

A guarantor is someone with a good financial standing who takes on the legal responsibility for the rental payments of a tenancy if — and only if — the renter is unable or unwilling to pay.

This acts as an extra level of financial security for the landlord. They need to know that someone is legally liable and financially able to pay the rent before they hand over their property.

And rather than turning someone away because they don’t quite pass referencing, bringing in a guarantor can be a great solution. And for both parties.

The renter can live in the home they wanted and the landlord can feel that their property and income is safe.

Moving house

Who are guarantors?

Usually a guarantor is one of your parents, a sibling or a close relative. Sometimes it can be a close friend. But anybody can sign up to be your guarantor.

Ultimately, it will be someone who trusts you to pay the rent and look after the property. Especially as they’ll be the ones paying if you don’t!

Whoever they are, they’ll need to go through referencing checks as well. So they’ll need to demonstrate some of the below:

  • A good, reliable income
  • Access to savings
  • A good credit history
  • UK residence

Even potential guarantors can fail referencing checks! Some might be rejected if their income is too low, they’re retired without an income and can’t prove their savings, or they live abroad.

But the landlord can step in here and use their best judgement. It’s the landlord who decides on the referencing criteria.

After all, if the renter only just failed their referencing checks then having a guarantor on board who has some savings and a good credit history might be enough to make them happy.

Legal rights and responsibilities

A guarantor enters into a legal agreement to pay the rent if you can’t or won’t pay it any more. And that’s for the full duration of the tenancy you signed up to.

They have no legal claim to the property and wouldn’t be allowed to move in as a tenant. It’s purely a financial commitment. And a big financial commitment at that, if you stop paying your rent.

How does that work in a flat share?

In shared homes — or ‘houses of multiple occupation’ (HMOs) — it can get tricky. Often, tenancy agreements are drawn up under “joint and several liability”. This means that if one resident stops paying rent, the other residents are liable for their payments.

This joint liability could also transfer onto the guarantor(s). So they could find themselves liable for a lot more rent than they bargained for.

This is something you should make sure to check within the guarantor agreement before signing.

What if you can’t find a guarantor?

If no one is able or willing to be your guarantor then this does reduce your options. But there are a couple of final things you can try.

Appeal to the landlord

The final decision rests with your landlord. So if your referencing came very close to passing or you can show that you’re reliable in another way, try it.

Can your current landlord, your boss or your teacher write a personal or professional reference for you? Can your boss indicate whether a pay rise will be coming soon?

Pay up front

If you fail checks but money isn’t an issue (poor credit or you’re an overseas national, for example) then paying rent up front might be a good option.

Offering to pay 3, 6 or 12 months up front will clearly give the landlord the security they need to know that you’re a safe bet.

Rent deposit, bond and guarantee schemes

This is an extreme option and if you’re looking into this then the premium rental world of build-to-rent probably isn’t for you. But if you are in a sticky situation and can’t pass references for any properties, then you should look into rent deposit, bond and guarantee schemes from charities and local councils.

What is a guarantor: a summary

Hopefully you won’t need to enlist the help of a guarantor when you move into your next home. But if the need arises, now you know what a guarantor is and what role they play.

If you go through referencing for a build-to-rent development, you should find the process nice and straightforward. Build-to-rent brands will usually have an expert team on hand to guide you through the process.

Mark Flint

Mark regularly contributes to the Right Rent blog; sharing all the latest news, crafting informative articles and sourcing the very best rental content for our readers.

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