Many people start to panic when a lender tells them that they’ll need someone to co-sign a mortgage for them, but they shouldn’t. Needing a co-signer simply means that you nearly meet that lender’s requirements, but they need a little more reassurance that the loan will be paid off. When you have a co-signer on your mortgage, they are responsible for the loan should you default and not be able to make the payments. But, aside from what a co-signer does and what they’re responsible for, who are they actually? Who can you ask to be a co-signer for your home loan?
Really, just about anyone you trust or, maybe more importantly, anyone who trusts you implicitly, can be a co-signer for your mortgage. You need to trust the co-signer just as much because there name is going to be on the title and so, they’ll essentially be a co-owner of the home and therefore will have just as much say in what happens to it as you will. They in turn, need to be able to put all of their trust and confidence in you, because if you default on the home, they’ll be the ones responsible for making all the payments.
But your co-signer will need a few more things than just a trusting relationship with you. They’ll also need to be in a good enough financial position to be approved for a mortgage. Because of that, their income and debt levels will be evaluated, as well as their credit score. It’s important that both co-signers and the original applicant understand this, as it will involve a lot of investigation into the co-signer’s most personal information.
Co-signers can be great for first-time homeowners who are having trouble getting a mortgage on their own because of bad credit or no credit, or because they don’t have enough verified income. But eventually, the original applicant will most likely be in a position to handle the mortgage contract on their own and in that case, the co-signer can be removed from the mortgage through refinancing or a second mortgage loan.
Mortgages that are co-signed can be a bit more complicated than a regular mortgage with only one applicant, simply because there are more people involved. That’s why we’ve dedicated our third monthly mini-series to taking an in-depth look at co-signers, the pros and cons of being one or having one, and how to get out of a co-signed agreement. And if you need a co-signer in the meantime, or are thinking about becoming one, speak to a mortgage broker in Ottawa. They can help you sort through the process of getting a mortgage with a co-signer, and all the issues that can come with it. “
