Parents Mortgage Guarantees To Be Called Upon by Banks
Parents Mortgage Guarantees To Be Called Upon by Banks
Some banks are currently planning to ask parents providing guarantees in respect of their children's mortgages to repay the outstanding arrears.
Parents may be expected to repay large amounts of money in respect of mortgage arrears. In some cases parents are exposed to liability in respect of the entire balance remaining on the house mortgage. Without such parental guarantees, many young house owners may not have received mortgage approval by the banks and building societies during the property boom.
The reduction in house prices since 2007 has meant that perhaps as many as 300,000 mortgage holders are now in negative equity.
A spokesperson for Bank of Ireland has said "In line with the terms of the guarantee, a guarantor is liable for the mortgage debt or relevant element thereof and may be pursued in the course of debt recovery, should the need arise.".
Allied Irish Banks have stated "We reserve the right to pursue these guarantees in situations of default, but always within regulatory guidelines and within the terms of the code of practice for mortgage arrears."
The code of practice of the Irish Banking Federation allows for a delay of up to six months before any legal action is taken by banks against defaulting borrowers.
Banks and building societies are now much more cautious during the mortgage approval process. First time buyers must provide evidence, even if they have received money from their parents to put down a deposit, that they have been able to build up savings from their own resources to an amount equivalent to the money gifted to them.