Sureties and guarantors

The Code of Good Practice will apply to sureties and guarantors of a mortgage loan, with the aim of safeguarding their main residence.

For the Code to be applicable, it is necessary that the surety or guarantor fulfils the same conditions as are established for the principal debtor.

Sometimes, in order to grant a mortgage, banks require guarantees in order to have more securities of payment of the debt. A guarantee means that if the debtor of the loan does not pay, the bank can turn to the guarantor to do so.

Also, it is usual that, in order to sign the guarantee, the waiver of the benefits of division, order and excussio is required.

  • The benefit of division allows the debt to be divided among the guarantors, if there are several of them.
  • The benefit of order implies that, in the event of non-payment, the financial institution must respect the "order". In other words, first claim from the debtor and then the guarantor.
  • The benefit of excussio means that nothing can be claimed from the guarantor until all the assets of the principal debtor have been executed.

Waiving the benefit of division implies that the institution may demand the entire debt from only one of the guarantors. Waiving the benefit of order and excussio may cause the institution to demand payment of the debt from the guarantor without first going after the assets of the main debtor or the financed house.

If the bank demands payment of the debt from the guarantor of the transaction (surety, guarantor or non-debtor mortgagor) and the guarantor meets the "exclusion threshold", the measures established in the Code of Good Practice will apply to the guarantor's main residence.

Moreover, in these cases, the agreement whereby the guarantor waived the benefit of excussio will not apply, i.e. before the institution claims the debt from the guarantor, it may require the guarantor to exhaust the assets of the principal debtor.

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