Final answer:
A mortgagor might need a guarantor if the lender perceives a higher risk of default due to factors like poor credit or inconsistent income, prompting the need for additional security in the form of a legally committed third party.
Step-by-step explanation:
Why Would a Mortgagor Need a Guarantor?
When applying for a mortgage, a bank or lender will typically assess the borrower's income sources and conduct a credit check to evaluate their likelihood of repayment. If there is concern regarding the borrower's creditworthiness, the bank might require a guarantor.
A guarantor is an additional person or entity that legally commits to repaying the loan, wholly or in part, should the original borrower default. This financial safeguard provides the lender with additional security, especially when dealing with borrowers who have less than ideal credit, inconsistent income, or other factors that present a higher risk of default. This practice is common in financial capital markets and is an alternative to other risk mitigation strategies like requiring collateral.