A person close to you asks you to put your property up as security for their financing. They intend to pay all instalments themselves. This intention does not yet answer what risk your property will assume or whether you are to become personally liable in addition. Before any signature, these levels must be explained independently.
Have the actual deed read
Ask what exactly is to be granted as security and which claim it secures. Mortgage (Hypothek), land charge (Grundschuld) and personal guarantee (Bürgschaft) are not interchangeable terms. This article considers only an expressly planned mortgage (Hypothek) as a limited starting point; other deeds require their own legal classification.
§ 1113 BGB describes the mortgage (Hypothek) as a burden on a property for satisfaction on account of a claim arising from that property. § 1147 provides for satisfaction from the property and the items covered by way of distraint (Zwangsvollstreckung). [BGB1113][BGB1147] A separate ongoing instalment is therefore not the only financial significance of such an agreement.
Specifically identify any personal obligations
Have it checked independently who the borrower is, what personal obligation you may be entering into and what relates exclusively to the property. An oral statement that you would only be helping does not resolve these questions. Note the amount, the security purpose, the link to the term and the conditions for any later release.
If the deed includes further claims, future changes or declarations permitting personal enforcement, these expressly belong to the expert review. No complete examination of these contents can be derived from the two provisions mentioned here.
Discuss the unpleasant scenario in advance
In the hypothetical case a father wants to use his previously differently used property to secure a loan for an adult child. The child considers their instalments well affordable. The father nevertheless asks about the case that these payments cease or the financing is to be changed.
He has explained which rights the bank would have and what courses of action he would actually have himself. He does not plan a repurchase or a replacement loan as an automatically available way out. Whether and when an enforcement would be possible is examined for the specific deed. The article does not state any blanket deadline for this.
Include your own life planning
If the property is to be sold later, occupied by you yourself or otherwise refinanced, the security encumbrance and any possible release must fit. A merely hoped-for later discharge is not treated as a confirmed state. Private relationships do not substitute for this clarity either.
The decision requires a comprehensible explanation of the property risk, possible personal obligations and the concrete exit route. Obtain independent advice that examines your own position. Another person’s promise to pay instalments is an important intention, but not a substitute for your own decision.