Can a Pensioner be a Guarantor For Renting or Buying a Property?

With the cost of living increasing all the time, young people are choosing to live at home for longer. People are getting married later, having children later and just generally needing longer to become financially stable before moving out of the family home. It’s this environment that has created a situation for an increasingly common question, can a pensioner, or someone who is retired, be a guarantor for rental accommodation or a new mortgage?

The short answer to this question is that yes, a pensioner or a retiree can be a guarantor for a rental agreement or a mortgage.

Now this doesn’t mean that absolutely anybody can be a guarantor when it comes to renting, but the criteria can often be quite wide. In this article, we’ll explain in more detail what is involved in being a guarantor, what the common conditions are and the situations where a guarantor might be necessary.

What is a Guarantor?

A guarantor is somebody who agrees to pay your bills if you don’t. The most common situations where a guarantor is used is for housing, like for a rental or mortgage agreement. This provides an additional layer of security for the bank or the landlord, as it means that they have another person who they can approach for payment if you fall behind.

Being a guarantor for someone is more than just fine print. It’s a big responsibility, and a guarantor needs to be prepared for the fact that they could end up financially responsible for the tenant or homeowner. Even for people who appear to have a stable financial position, circumstances can change and the guarantor could end up on the hook.

What are the Requirements to be a Guarantor?

Every landlord or bank will have their own criteria for a guarantor. Essentially what they are looking for is financial security. The reason that they are requiring the use of a guarantor is that they feel they need additional security. This could be because the borrower or renter doesn’t have a long credit history. It could be because they have a poor credit history. It could be because they have unstable income such as freelancing or other self employed.

Because of this, it is important that the guarantor has a level of financial security that is able to satisfy the lender or landlord. With this in mind they are likely to need to have a good credit history of their own and no major financial issues such as previous bankruptcies. 

Can a Guarantor be Retired?

The good news is that this financial stability doesn’t just have to be in the form of a salary. If your guarantor is a pensioner or retired, they won’t have a salary from a job. However, they will likely have income from other sources. This could be from a workplace pension, the State Pension or even other assets such as investment properties or share investments.

All of these assets and sources of income can be taken into account when looking for a guarantor. They don’t have to be a particularly wealthy person, they just need to have the financial means to cover your payments if you’re not able to.

For example, if your ongoing financial commitment is rent of £750 per month, the landlord or bank will assess the guarantor on whether they themselves would be able to afford this. Given that a retired person or a pensioner is more likely to have paid off their own home, this means they could have additional cash flow available to cover this cost if they needed too.

Does it Cost More to Have a Guarantor?

A letting agent is not allowed to charge extra if you require a guarantor. They can’t charge extra fees for doing a guarantor agreement or a credit check, so you should question this if you are being asked to pay extra fees.

Who Can’t be a Guarantor?

Whilst the list of people who can be a guarantor is probably wider than you thought, there are some limitations that many landlords or lenders will impose. Some of the factors that are likely to make someone ineligible to be a guarantor include:

• Over age 75

• Under age 21

• Poor credit history

• Low income

• Low savings

Remember that every landlord and every bank will have a different set of criteria, and there will always be exceptions. If your grandad is Rupert Murdoch, they’ll probably waive the 75 year old limit! It’s always best to check with your own specific circumstances

Summary

A guarantor is someone who agrees to take on the financial liability of a mortgage or rent payment, if the person they are guarantor for stops paying. This means that becoming a guarantor is a big financial commitment, and you should be prepared for the worse case scenario. If things go wrong, you might need to pay the rent or the mortgage.

Each landlord or lender will have their own criteria for a guarantor, but generally speaking a pension or a retiree can still be a guarantor. Their suitability will be based on their income and their assets, and it doesn’t make a difference if this income is from a salary or from other sources like pensions and investments.