Last updated on December 11th, 2019 at 02:42 pm
Before renting, most landlords will carry out referencing checks on potential tenants to ensure that they can pay their rent. If you don’t meet the income requirements – don’t panic, you’ll still be able to rent, but you may need a rent guarantor. In this article, we’ll explain what exactly a guarantor is, why you need one and who your guarantor can be.
- What is a rent guarantor?
- Why do I need a rent guarantor
- Rent guarantors and tenant referencing
- Employment references and income requirements
- Do I need a rent guarantor if I’m self-employed?
- Do I need a rent guarantor if I’m retired?
- Rent guarantors and bad credit
- Rent guarantors and rent arrears
- How do they become my rent guarantor?
- How long does a rent guarantor last?
- What happens if I don’t have a rent guarantor?
- Paying for guarantor reference checks
What is a rent guarantor?
Simply put, a rent guarantor is a person who will agree to pay your rent if you are unable to. Your guarantor can be anyone you know – a friend or relative – who meets the income requirements of the property.
Your guarantor does not need to be a home-owner, but they must live in the UK and you should have their consent before giving their details.
Why do I need a rent guarantor?
Getting a rent guarantor provides your landlord with a level of financial security and reassurance. Having a rent guarantor in place also benefits you as the tenant – as you’ll have peace of mind knowing that if you fall into a problem with your rent, your guarantor can help you and your landlord won’t be left out of pocket.
Whether you need a guarantor or not will be determined during the tenant referencing process.
Rent guarantors and tenant referencing
The tenant referencing process consists of:
- An employment reference (including an income check)
- A previous landlord reference
- A 6-year credit check
Failure to pass any of these checks will mean you won’t pass referencing – but don’t worry. Being unable to meet some of the referencing requirements does not mean that you won’t be able to rent at all.
Before the official referencing process takes place, the tenant should be given an opportunity to clarify anything that may cause them to fail referencing. At this point, they may reveal that they have a County Court Judgement (CCJ) against them or are unable to meet the income requirements of the property. This informal ‘prescreening’ stage allows the tenant to be open and honest with us and gives us a chance to discuss their situation with them and explain their available options.
If, for instance, a tenant reveals that they don’t meet the income requirements, a valid option for them would be to provide a UK-based rent guarantor. We will talk this over with the tenant and correspond with the landlord to come to an agreement that all parties are happy with.
Employment references and income requirements
As part of the referencing process, you must show that you (and any other registered tenants) meet the income requirements of the property. The income requirements are 30 times the monthly rent. For example, if your monthly rent is £1,000, you must have a combined household income of £30,000 (30 x £1,000 = £30,000).
If you’re income is less than this amount, you may be asked to provide a UK-based guarantor.
If you’re in full-time employment, you may also be asked to provide an employment reference. If you’re self-employed or retired, things are a little different.
Do I need a rent guarantor if I’m self-employed?
If you are self-employed (this may include investments or rental properties you may own), you may be asked to provide any of the following:
- At least 6 months of personal bank statements
- At least 1 month of business bank statements
- A copy of your SA302 form
- Confirmation of your income from your accountant
For those who have been self-employed for less than 6 months, it may be difficult for you to provide the sufficient evidence you need to pass referencing. If this is the case – even if your income meets the requirements of the property – you may be asked to provide a UK-based guarantor.
Do I need a rent guarantor if I’m retired?
If you are retired and/or will be paying your rent with your pension, you may be asked to provide proof of income.
Again, tenants who want to pay their rent with money saved in the bank may struggle to pass referencing because they don’t have an employment reference or evidence of continuous income. Therefore, you may be asked to provide a UK based guarantor.
In some circumstances, landlords may be happy to accept rent in advance instead of a guarantor.
Rent guarantors and bad credit
A 6-year credit check is also part of referencing. The credit check contains financial information held against your name and addresses over the past six years.
If your credit check reveals that you have any CCJs or outstanding debts, you may be asked to provide a rent guarantor.
Are you claiming Local Housing Allowance / Universal Credit (DSS)? Not sure how much you can afford to rent? Here’s a simple calculator to find out your affordability.
Rent guarantors and rent arrears
If you or your previous landlord tell us that you have been in or are currently in rent arrears, this will affect your reference check. Landlords need to be reassured that their rent will be paid on time – and a history of delayed rent payments is not a great comfort. To give your landlord that extra level of security, you may be asked to provide a UK-based guarantor to cover your rent if you’re unable to pay.
How do they become my rent guarantor?
So, lets imagine that you’ve discovered you need a rent guarantor and your aunt has agreed to do it for you. What happens next?
To confirm that your aunt can cover your rent, she will undergo a reference check to verify her details, such as her income and credit history. Once both you and your aunt (as your rent guarantor) have passed referencing, it will be time to sign the guarantor agreement. Before they sign, you should encourage your rent guarantor to read the agreement carefully so that they are fully aware of the conditions.
How long does a rent guarantor last?
A guarantee agreement signed by all parties is usually open-ended, meaning that the guarantor can be liable beyond the fixed period of the tenancy and if any changes are made. If the agreement isn’t open-ended, it should specify when the guarantor’s liability starts and ends and the guarantor should be informed of any significant changes made to the tenancy agreement.
What happens if I don’t have a rent guarantor?
Some people are simply unable to provide a guarantor because they don’t have a person that meets the income requirements and are willing to help them. In this circumstance, it’s still possible for the landlord to accept the tenant – although it’s unlikely and risky for the landlord.
It’s important to remember that just because a tenant may require a rent guarantor to pass referencing, it doesn’t mean that a situation will occur where the tenant can’t pay. Additionally, it’s also worth noting that not meeting the income requirements of 30 times the monthly rent does not always mean that the tenant’s salary can’t cover the rent at all.
At LettingaProperty.com, we always recommend that our landlords seek a guarantor for tenants that fail reference checks. However, at the end of the day, the final decision – and the financial consequences – lie with the landlord. To qualify for Rent on Time or Guaranteed Rent, a landlord’s tenant must pass referencing or have a guarantor.
Paying for guarantor reference checks
As of June 2019, the Tenant Fee Ban means that landlords must pay for reference checks – not the tenant.
LettingaProperty.com offer comprehensive reference checks for just £49 per tenant (inc VAT). For an initial £149 and just £59 a month, we’ll advertise your property, carry out your references, draft your tenancy agreement, secure your deposit and collect and insure your rent.
Explore our entire range or rental plans and services here.