What do banks want to receive in the form of guarantees for mortgage approval? First, these are specific guarantees of the applicant's solvency. The bank or lender wants to be sure that the borrower will be able to repay the loan in monthly installments.
Banks always assess the creditworthiness of the client. In Italy, it is established by law that loan payments must not exceed one third of the borrower's monthly income, otherwise you will receive a loan refusal.
In addition to checking a loan, a bank or credit institution in Italy establishes additional guarantees, usually of two types: personal and real (collateral).
Let's figure out what it is.
Real guarantees in the case of a mortgage is essentially a security that guarantees the lender the opportunity to return the property when the client becomes insolvent for the further sale of the property at an auction in order to return the remaining money.
Personal guarantees are essentially the provision of guarantors. The person who signed the surety is a third party to the borrower and assures the bank that the obligations will be met if the principal debtor can no longer repay the loan.
In short, the guarantor appears when the borrower cannot repay the loan (while in the case of regular payments of contributions, the guarantor may never have to intervene during the entire term of the agreement). If such a situation arises, the bank calls the guarantor and may request from him the unpaid amounts specified in the agreement itself.
What is important for the guarantor to know.
The guarantor is liable like all of his assets. If more than one guarantor is provided, each of them is responsible proportionately, while remaining jointly responsible with the other guarantors. In this case, however, the guarantor does not have any rights to the property, since he is not the owner. Consequently, the guarantor will not be able to deduct the interest on the loan for tax purposes.
The guarantor decided to stop becoming a guarantor. Often the guarantor is a close person, family member or relative, work colleague. The guarantor trusts the borrower and vice versa. But when a situation arises that the guarantor has decided to relinquish responsibility for some reason, the bank must give its consent or refusal, since any change in guarantees damages the bank. If necessary, the bank can give its consent in exchange for additional security provided by the borrower in the form of additional assets.