What is a lease guaranty bond?
Finding a great apartment in the city can be easy. But passing a landlord’s income and credit requirements can seem close to impossible.
In some big cities, landlords will not rent to you unless you:
- Have a credit score of 700 or better
- Make an annual salary 35-40 times the monthly rent
- Can find someone with great credit and an even higher salary (typically 90-100 times the monthly rent) to co-sign the lease, especially if you don’t meet the above salary requirements
Even if you can pass these hurdles, you still need to get the documents together. If that takes more than a day or two, someone else might grab the apartment.
I can’t even. Why are landlords so strict?
Landlording is not easy. And when a tenant stops paying the rent, the costs add up very quickly. Plus, it can take a month or longer to evict a tenant, and another month or two before a new tenant moves in.
That’s why landlords make the hurdles as high as possible. To keep their risks as low as possible.
A lease guaranty bond can help
You want an apartment. The landlord wants a guarantee that you can—and will—pay your rent. One solution? Buy a lease guaranty bond, which is an agreement among three people or parties:
- A principal—that’s you, the person renting the apartment
- An obligee—your new landlord
- A surety company—this is where you buy the lease guaranty bond
How does it work?
When you apply for a lease guaranty bond, the requirements—income level, credit score—are usually relatively easy to meet. You’ll no longer need a co-signer. And you should have your answer back from the surety company within a few hours.
If you stop paying rent, the lease guaranty bond kicks in and pays your landlord the money you owe. It also helps pay any legal fees related to evicting you.
However, don’t confuse a lease guaranty bond with “lease insurance,” and buying a bond of this type is not a pretense to skip out on the rent! If the surety or insurance company ends up needing to reimburse the landlord for his or her lost rent, the company would then sue you for the rent and legal fees it paid to your landlord.
What does it cost?
To buy a lease guaranty bond, you will pay about 50-120% of one month’s rent for the apartment. So, on a $2,000 monthly apartment, you’re looking at anything from $1,000 to $2,400 for the bond. This is an upfront, one-time fee.
For many renters who want to secure a great apartment with minimum hassle, this fee is money well spent.