Guarantor Vs Co-signer - YouTube

Speaker 1: All right. Okay. Moving on to our next question.

It must be from anonymous because we don't have a writer. So we'll just say anonymous

asks. Do banks require that a co-signer be part owner of the second property as well,

would forming an LLC with the other individual help from becoming a co-signer and that's,

that's the entirety of the question.

Speaker 2: That's why there's no right or wrong, but

I think I know what they're asking on that one. First of all, in general banks love co-signers

right. If you assign an, a mortgage or any type of loan agreement, you don't have to

have a, a real interest in the property. But when it comes to real estate, most banks want

the parties who are on the loan agreement to have a vested interest in the property.

I actually know that question. That's why I could jump right into the answer. These

people actually are really not, they call themselves co-signers, but really what they

were were guarantors. Okay. And you know, the difference between a guarantor and a co-signer

Speaker 1: No,

Speaker 2: Well, not much. There's not much of a difference.

A co-signer usually is somebody on a loan agreement though. Who's actually on a loan

application. So you and I could go to the bank and we could borrow money and we would

be coal borrowers, and we'd be co-signers okay. Now let's pretend you go to the bank

and you get your own loan, but the bank says, you know, we really like you glare. And we

know that you're very active in the real estate market. We trust you. We just need a little

bit more security. And do you have a friend or somebody who, you know, somebody who you

know, was credible, like David Sobel, who would maybe co-sign or be a guarantor for

you? So a guarantor does not have to have an interest in the property. Got that. So

lawyers call it, well, I don't know if all lawyers call use this terminology, but the

people who taught me, my mentors basically basically said to me, one day, you know, what

a guarantor is, David don't you. And I said, I don't know. They signed David, you know,

sign a bat with somebody else. And they're like, no, a gearing tourism idiot with a pen

Speaker 2: Being a guarantor is not a great situation.

You have to have a lot of faith in your borrower. However, I know we're going to go down a quick

slippery slope. You can curtail the obligations that you may have as a guarantor. And there's

a number of different ways to do that too, too long for us, for discussion tonight. And

you're probably signing their Blair like, oh, good. But if you you can go to our website

of proven resource.com. We have a whole article on how to change, reduce, modify limit your

legal exposure and financial exposure as a guarantor. Okay. Okay. But a co-signer and

a guarantor are very similar.

Speaker 1: Okay. So, so to answer this person's question,

the second portion of their question is, would forming an LLC with the other individual help

from becoming a co-signer?

Speaker 2: No, I didn't even understand that part, but

they're just trying to hide not high, but put an extra layer between their personal

liability to a bank and you know, their corporate liability.

Speaker 1: Okay. Yeah. So it seems like this question

is there is someone who wants to help out, but wants to keep, keep it kind of at arms

length a little bit, you know, facility liability, et cetera, which, which I you know, and I

don't blame them. So the last time I had a co-signer was student loans, like my parents

co-sign loans, but outside of that, I've never had a co-signer, especially for, for any real

estate purchase. So that's not anything that I'm aware of any way.

Speaker 2: Here's the thing about the co-signer. So like

when your parents co-sign for you this goes to the illustration of, you know, they're

really, co-applicant somebody looked at their financial and credit credibility and their

financial, where, you know, wherewithal, when they made the loan to you, Blair, let's say

for your student loan, they still look to your folks. So the co-signer somebody from

my perspective is somebody who's still, they may not have to make a complete application,

but they do have to be verified in their, their borrowing ability. You know, are they

going to be a good debtor? That's what a cost center is. And the guarantor is just one more

person to remove. We don't care who the guarantor is. If they, you know, most banks would just

say, oh, you can guarantee if you have a house, maybe some money, but we're not going to really

qualify you if you want to stand up and step into the shoes of the borrower. Go right ahead.

That's the difference? I do have one more comment, though. If a loan is taken out by

a limited liability company or an S-corporation, pardon me? A C corporation, sorry about that.

The corporation is the primary borrower. Then what a bank will do, however, is then make

the individual, a guarantor

Speaker 1: Individual

Speaker 2: Actually has an interest in the company.

Speaker 1: That makes sense. Okay. Okay.