Is it possible to guarantee a mortgage with a property?

Question

José Manuel Alburquerque · Accepted Answer

Yes, someone who is not the debtor can mortgage their own property to secure another person's loan, as parents often do with their flat so that their son or daughter can get a mortgage on his or her own home. The law calls this person a “hipotecante no deudor”, a non-debtor mortgagor. Unlike a guarantor, who is liable with all their assets, they risk only that property and only up to the amount set in the deed. But many deeds also require you to sign as a guarantor, which means being liable with all your other assets as well. Before signing, it is advisable to read carefully in what capacity you are signing. Putting up your home as security is not the same as being a guarantor In everyday language people say that the parents “stand guarantor with their flat”. Legally, these are two different things: A guarantor undertakes to pay if the debtor does not and is liable with all their assets, present and future. A non-debtor mortgagor owes nothing. What they do is let their property be mortgaged as security for the loan. If the debtor does not pay, the bank can ask for that property to be auctioned, but only up to the amount for which it is liable under the deed. If the auction does not cover the debt, the rest cannot be claimed from their other assets, unless they have also signed as a guarantor. The deed sets the property's mortgage liability, that is, the maximum amount for which it is liable in respect of principal, interest and costs. If the home being bought and the parents' flat are mortgaged at the same time, the deed must state the amount for which each one is liable. Your property is liable only for the part allocated to it. What to check before signing Whether you are signing only as a non-debtor mortgagor, as a guarantor or as both. If you sign as both, you are liable with the property and with everything else as well. The amount for which your property is liable. If the property is your home, bear in mind that you could lose it if the debtor stops paying. It is worth weighing this up calmly. If the mortgage is on a home, the “Ley de Contratos de Crédito Inmobiliario”, Spain's mortgage credit act, requires the person providing the security also to receive the loan information and to appear before the notary beforehand, who explains it to them and records this in a notarial record. Ask for the draft deed in good time. If the debtor stops paying The bank brings the mortgage enforcement proceedings against the debtor and against you, as owner of the mortgaged property, which may end up being auctioned. If the auction does not cover the debt, the bank can continue against the debtor and the guarantors for the shortfall, but not against your other assets if you were only a non-debtor mortgagor. If the loan is secured by a mortgage on the debtor's principal residence and you are in a very difficult financial situation, on the terms laid down by the law protecting mortgage debtors without resources, you can ask the bank to exhaust the debtor's assets first, just like a guarantor. Once the debt has gone down, you can ask the bank to release your property from the mortgage. The bank is not obliged to, but it can be negotiated.