Frequently asked questions
What is independent property legal advice?
Independent legal advice involves seeking guidance from a lawyer who has no affiliation with the opposing party. For borrowers, this opposing party generally refers to banks or lenders. It is crucial for borrowers to obtain such home loan legal advice as it helps them fully grasp their rights, responsibilities, and potential risks before making significant decisions like taking on a mortgage. By consulting an independent lawyer for property legal advice, individuals can add an extra layer of protection and make informed choices based on expert analysis of the law.
Why is legal advice required for property transactions?
Engaging in property transactions, such as buying or selling real estate, can be a complex endeavour. It entails navigating intricate legal documents, considering financial implications, and understanding potential risks. Unfortunately, most borrowers lack legal expertise and may not fully comprehend the complexities associated with making decisions that have legal ramifications or entering agreements. To address this concern, it is sometimes required for borrowers to seek independent legal advice before proceeding with any property transaction. This ensures that borrowers obtain a comprehensive understanding of the terms and conditions involved before making any commitments. By doing so, individuals can make informed choices and mitigate potential pitfalls.
What is involved in getting independent legal advice?
When seeking independent legal advice, it is important to consult with a property lawyer who has no affiliation with the opposing party, such as your bank or lender. During this consultation, the lawyer will review your situation and analyse the relevant legal documents. They will offer expert guidance on your rights, obligations, and potential risks associated with accepting the agreement. Additionally, they will help simplify complex legal terms and explain the legal implications in a clear and thorough manner.
What is the purpose of a guarantor?
In certain situations where a lender requires more confidence in granting a loan, a guarantor may be necessary. A guarantor is someone who takes on the responsibility of repaying the lender if the borrower is unable to make their own payments. For example, many parents choose to provide personal guarantees for their children’s home loans to help them enter the property market.
As guarantors, they may be required to put forward assets such as their house or car as collateral for the loan. If the borrower cannot fulfil their repayment obligations, the lender has the right to sell these assets to recover the outstanding amount.
What are the risks of being a guarantor?
The potential requirement to cover the borrower’s monthly loan repayments is perhaps the biggest risk you will face as a guarantor. Should the borrower be unable to make repayments, two things will occur. The lender may sell their assets first to recover the debt. If any outstanding amount remains after, your assets could also be pursued by the lender to cover it.
Acting as a guarantor can also limit your borrowing capacity. You may also need to seek the lender’s consent if you intend to sell assets that you have offered as collateral.
Lastly, if the guaranteed loan isn’t repaid by either party, both you and the borrower may experience a negative impact on your credit score.