Can I remove my dad as personal guarantee?

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I am thinking of emigrating and want to remove my father from my mortgage as personal gaurantee. What are my options?

Q. I bought an apartment three years ago for €360,000 and am now in negative equity of about €100,000. My wife is a primary school teacher and I have been made redundant and we are thinking of emigrating to Australia and don’t know if we will ever come back. I am only 27 and will probably start a family soon. My issue is that my father acted as guarantor on the mortgage and I woul like to clear him of any financial responsibility before I leave.

Frank, Dublin 15

A. Frank, put simply, it looks like your father is stuck with being guarantor unless the bank agrees otherwise. RTE Money has been asked similar questions before and the banks generally respond by saying they will loak at loans on a case-by-case basis. But if you are young and trying to flee negative equity, the banks will not be so sympathetic.
We put your question to lawyers at the Free Legal Advice Centre show seemed to concur. This is what they said:
“A personal guarantee is a legal undertaking given by an individual to a lender, usually a bank or a building society, promising to pay the loan in the event of default by the borrowers. This promise imposes a legal obligation on the guarantor to assume the responsibility of repaying the loan if the borrowers are unable to repay. The guarantor does not have any legal entitlement to an interest in the property.

“If the borrower defaults, most lenders will work with borrowers to set up repayment plans. The new Code of Conduct on Mortgage Arrears, which came into effect on 1 January 2011, sets out a standardised way of how lenders and financial institutions should address the problem of mortgage arrears. Download FLAC’s factsheet on the Code here. The full Code of Conduct on Mortgage Arrears is available on the Central Bank’s website.

“If, however, the situation should get to the point where it becomes clear that the borrower will not be able to meet their obligation no matter how the lender works with them, the lender will repossess the house, sell it, and transfer both the responsibility for making the rest of the payments and covering any potential loss from the sale to the guarantor, in this case your father.

“Unfortunately, this person’s father is legally committed as a guarantor to the bank or building society and cannot be released from his obligations without their consent.”

More information

The Central Bank’s Code of Conduct for consumers

The Central Bank: Consumer guide to dealing with your lender

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