Going Guarantor for the kids… Is it worth the risk?

Are you considering going Guarantor on a loan for your kids?  John’s story is an all too common, sad occurrence.  Smart Legal Family Lawyers can discuss with you your options on how you can best protect them when they take a leap onto the property ladder.

“As parents, you want the best for your kids.  And today is so different from when we were first starting out.  Back in our day, the interest rates might have been high but you could still buy a house on one wage.  Having more than one car or even an overseas holiday wasn’t even a consideration.  It was hard, but it was doable and much much simpler.  Nowadays, it’s hard, it’s busy, there is so much more to do and achieve and so much more to HAVE.

Our daughter was in a long term relationship with a great lad.  They were good kids and in love. They decided to put off marriage to buy a house.  Putting their hard earned money into a house deposit rather than a one day celebration made good sense to them.  Who were we to argue.  We agreed and thought it was a great plan.

We were house hunting together and planning their futures.  Hell! We were planning ALL our futures!  It was a happy time.

They found a house which was perfect.  Suited them down to the ground but it was out of budget, of course.  Just a touch, but out of budget none the less, so my wife and I said we would chip in.  Help them out so to speak.  We set about a plan of attack on how they would repay us because even though we wished we were in a position to just hand it over, we just weren’t.

When the finance came back declined, it seemed the only way was for us to guarantee the loan.  We honestly thought it would be easy.  We couldn’t afford to give them the deposit but we could at least lend it to them and then help them secure the loan.  They were so happy.  I’ll never forget their faces when we said yes.

They got the house.  My daughter was so happy.  She was studying full time to become a nurse and working part time.  We would be round every other weekend helping with odd jobs and small renovations.   I’m a dab hand at a deck you see.

About a year in, things started to change.  There was a shift with her boyfriend.  Late nights, lots of drinking.  I tried to have a chat with him but it wasn’t welcomed despite us always having a great relationship.

He lost his job, that was the first thing.  My daughter had to start studying part time to make ends meet so we told her to hold off on repaying us to ease the pressure a little.

Before we knew it, he was gone.  Took off lord knows where with all his things leaving my daughter distraught and with no answers.

She’s a good girl.  Works hard.  She took a second job and tried to keep her study’s up but it was too difficult.  We just knuckled down and helped where we could.  We didn’t even consider getting any advice, not at any point.  

The pressure was wearing her down.  She was having a few too many sick days, so money was getting tight.  At one point the bank sent a letter and I will be honest, I started to think “Dang, this could get bad for us.”

But our girl is determined.  She decided to move back home and we were good with that.  We wanted her to keep studying.  We knew it was the best thing in the long run so the house was rented out to cover the majority of the mortgage while she worked round the clock paying all those shortfalls.  

She loved that house.  I think she thought that once she had a job she would be able to afford it on her own but that wasn’t to be. See old mate turned up.  Looking like a ghost of the boy we once knew.  He was such a good guy but the man that turned up at the door was different.

At first, he wanted the tenants out but quickly changed his mind and wanted the house sold. We tried to talk him round because this pandemic had not only lost so many jobs but property prices had taken a bit of a hit.

He made life so difficult for her that in the end she had no option.  With the lease coming to an end only 6 months after the tenants moved in, the house was sold at a considerable loss.  

A year our girl worked 2 to 3 jobs to pay those bills.  Then another 6 months covering all the shortfalls.  She lost everything.  It was hard to watch. Part of me felt responsible like I should have known or maybe I should have just protected us better. We of course lost our deposit; money for our retirement which meant I have had to head back out in the work force for another year.  

Lord knows we are grateful it never came to the bank stepping in and you can bet we have learnt a lot.  I just wish we had of known more about how we could have protected her better in the beginning, after all, she’s my little girl, I would do anything for her. “

Call Smart Legal Family Lawyers to discuss how a Binding Financial Agreement could help protect you and your family when buying your first home with your de facto partner.