Ever dream of having your own place but feel a bit lost when it comes to mortgages? You’re not alone! In this easy-to-read guide, we’ll explore what a mortgage is, why you might need someone else’s help, and how a bank decides if you can pay it back. Let’s dive in!
When Do You Need a “Helper” (Guarantor)?
Sometimes the bank looks at how much money you earn every month and decides you don’t make enough to afford the monthly payments. That’s when you might need a guarantor (let’s call them a “helper”).
- Guarantor (Helper): Someone, like a family member or a close friend, who promises to help you pay your mortgage if you can’t. They don’t own your house, but they’re there to make sure the bank knows it will get its money back.
Why Does the Bank Ask for a Helper?
Banks want to be sure they’ll get their loan money back. If your paycheck is too small, the bank worries you might not be able to make your monthly payments. Having a helper with extra income makes the bank more comfortable lending you money.
How the Bank Counts the Helper’s Income
Let’s pretend your helper earns a certain amount of money every month. The bank will take a close look at:
- How Much They Earn: Maybe the helper’s paycheck is, for example, 24,000 units of currency each month.
- How Much They Owe: If the helper already has monthly bills or other loans (let’s say those add up to 11,000 units), the bank subtracts that from 24,000. That leaves 13,000 units as the helper’s leftover money.
- Only Half Counts: Here’s the tricky part—often the bank will only count half of whatever’s left. If the helper has 13,000 units remaining, the bank might only see 6,500 units as usable to support your mortgage.
This process explains why people sometimes say, “My helper makes a big salary!” but then find out that the bank isn’t counting the whole amount. The bank’s goal is to be extra careful, so it only takes a portion of the helper’s leftover income into account.
Why the 50% Rule?
You might wonder: “Why only half?” The bank does this in case the helper has emergencies or unexpected expenses. By only relying on half, the bank tries to make sure everyone involved can still pay their bills without getting into financial trouble.
Putting It All Together
- You Need a Mortgage: You want to buy a home but can’t afford all the costs upfront.
- The Bank Checks Your Income: If your income isn’t high enough, the bank might say, “We need a helper.”
- The Helper’s Income Matters: The bank looks at how much money your helper makes and their regular expenses.
- The Bank Counts Only a Portion: After subtracting what your helper owes monthly, the bank typically only uses half of what’s left.
- Loan Approved or Not: If that half still shows enough money to cover the mortgage payments, you’re likely to get approved.
Pro Tips (Explained Simply)
- Have a Backup Plan: Even if you have a helper, make sure you have your own savings. This is like having a piggy bank for emergencies.
- Check Your Monthly Budget: Write down all the money you earn and spend each month. This helps you see if you can really afford the payments.
- Ask Questions: Don’t be shy about asking the bank how they do their math. The more you know, the better you can plan.
Conclusion
Getting a mortgage can feel like learning a new game with lots of rules. Sometimes, the bank says your score isn’t high enough on your own, so you need a helper to boost your chances. The helper’s income is important, but the bank only counts part of it to be extra safe. This system protects both you and the helper from taking on too much debt.
Too Long; Didn’t Read
- A mortgage is a loan from the bank to buy a home.
- If your income is too low, you might need a helper (guarantor).
- The bank checks the helper’s income and subtracts their bills.
- Usually, only about half of the helper’s leftover money counts toward your loan.
- This ensures everyone can handle the payments without stress.
Use this knowledge to talk confidently with your bank about your mortgage options, and always remember to keep an eye on your budget so you can enjoy your new place without worry!
