When first leaving home and starting out on your own, you are likely going to be renting. The main issue for a lot of young, first-time renters is that they have limited credit history and potentially do not earn enough to pass an affordability check as far as the requirements for renting are concerned. Quite often, in these circumstances it is easy to believe that there are no options and staying at home with your parents is the only option. This is not the case, however, you can rent a home, subject to landlord approval, with a guarantor. In this guide we will look at how to rent a home with a guarantor in more detail.
Why would I need a guarantor?
When applying for a rental property, the landlord or their agent will carry out certain checks such as a credit rating check and also an affordability check. Some people have poor credit ratings for missing payments on loans or credit cards for example and some just have a poor rating because they have never really had any credit. This sends up a red flag to a landlord and creates a risk for them should they accept you as a tenant. In addition, a landlord will check to see if you can afford the rent and typically a rule of 30x is applied. This means that your annual salary needs to be greater than 30 times your monthly rent. So, if your rent is £1,000 per month a landlord or their agent will want to see an annual salary of at least £30,000. Sometimes if someone does not meet these criteria, then they are rejected as a potential tenant. In these circumstances a guarantor can be used to reduce the risk to the landlord and help get you accepted as a tenant.
What is a guarantor?
A guarantor is a person, typically a relative or a close friend, who signs a contract that agrees to pay your rent should you not be able to pay it. The important thing to understand here is that a guarantor will sign a contract which legally obliges them to pay your rent if you do not do so.
How to get a guarantor
The first part is potentially the easiest and that is finding someone who would be willing to be a guarantor. When looking at whom to ask, consider that the guarantor will need to fulfil the following criteria at a minimum:
- Be over 18
- Be a home owner (this isn’t always the case but it is likely that a landlord would not accept someone who was renting)
- Have a good credit rating
- Live in the UK
- Be able to afford the rent and their own outgoings
What Checks will be done on a Guarantor?
Very much the same checks as are carried out on the tenant. A landlord or their agent will check the guarantor’s credit rating, employment status and carry out an affordability check. Typically, a guarantor will need to earn at least 3x the annual rent. You can use a retired guarantor, but they would likely have to show pension income or savings which are enough to cover any debts.
What is a guarantor liable for?
This depends on the contract that is signed. At the very least the liability will be for any unpaid rent, but in many cases, could also be for any damage caused by the tenant which cannot be fixed by using the tenant’s deposit. Guarantors should check the guarantee agreement carefully to see exactly what is covered and for how long. It is important to understand how the guarantee works at the end of the fixed term and how it is affected by rent variations.
Even though it might look like a landlord will not accept you on financial grounds, using a guarantor is a way of overcoming this issue. It really does depend on the landlord but most are amenable to using guarantors. As long as you can find someone who is willing to act as a guarantor and they are able to afford to pay any debt you leave, renting with a low income or poor or no credit history should not be an issue.