Mortgage Co-signing

Housing affordability is becoming more challenging for buyers in the GTA. Salaries do not keep up with rising home prices and high-ratio mortgages can be difficult to obtain for a buyer on a strict budget. A family member or a close friend can help by agreeing to co-sign on a mortgage.

Becoming a co-signer brings the responsibility of making the loan payments in the event the original borrower can’t. It provides an extra assurance to the lender and helps applicants qualify for a mortgage. Most often, co-signing occurs between a parent signing on a mortgage for their adult child. However, co-signing can help in many different cases as a temporary solution.

Co-signing on a mortgage is usually a short-term strategy for helping new buyers who don’t qualify on their own. For instance if a couple purchased a new home but have not sold their own, they require a co-signer to close on the purchase until they can afford the new loan by themselves.

Co-signers are included on the mortgage title, making them accountable for payments if the primary borrower defaults. This is different from a guarantor who is not included on the title. A co-signer can be taken off of the title after a minimum of one year if the help is no longer required.

Becoming a co-signer means qualifying for a mortgage and carrying all the financial responsibility it entails. It will also show up on the co-signer’s credit report, which will impact their credit score. It is important for the co-signer to learn of any tax liabilities, the impacts on any future finance applications and the responsibility of taking on the new debt.

A consultation with an expert financial and tax advisor will help navigate the co-signing process and ensure a good financial standing in the future.