A guarantee is a promise by one party (the guarantor) in favour of another party (the beneficiary) to fulfil the obligations of a third party (the primary obligor) if the primary obligor defaults.

Often a guarantee relates to the payment of a monetary debt (for example money owing under a lease or loan agreement) but can also include obligations to perform.

As a business owner or company director, you may be required to provide a personal guarantee to a supplier providing goods on credit or to a lender advancing funds or to your landlord if you lease business premises.

Guarantees are also commonly used by lenders in situations where parents are requested to guarantee loans taken out by their children, for instance, where there is an insufficient deposit or the borrower is considered “high risk”.

A guarantee may also involve the lender taking security, for example in the form of a mortgage, over the guarantor’s own property.

As the giving of a guarantee involves substantial financial risks, it is essential that you obtain legal advice prior to signing a guarantee.  It is also recommended that you obtain advice from your financial advisor and consider how the guarantee may affect your future personal financial plans.

A reverse mortgage is a type of loan that allows you to borrow money using the existing equity in your home as security.

Interest is charged like any other home loan, except you don’t have to make repayments while you live in your home – the interest compounds over time and is added to your loan balance.

You must repay the loan in full (including interest and fees) when you sell or move out of your home.

At Navigate Law, we can review and explain the terms and conditions of your reverse mortgage.  You should also consider getting financial advice before you commit to a reverse mortgage.