If one of your family members or very, very good friends has bad credit and doesn’t have a sizable down payment to make up for it, they may come to you and ask you for help by co-signing their Ottawa mortgage. This can be a great thing to do. It will give them a good start and let’s face it, it just feels good to help out those in need. But hold up for just a minute. Being a co-signer isn’t a big responsibility, it’s a huge responsibility. And if you’re not careful and don’t make the right decision, it could end up costing you everything.
A co-signer on a home loan has a tremendous amount of responsibility because they’ll actually be signing all the mortgage paperwork along with the original applicant. This means that your name will be on the title, and that you’ll be responsible for the payments. Typically co-signers don’t make any payments on the home while the first applicant is living in it. But if they default, the entire balance of the loan will be on you. The good news is that because you’ll be co-owner of the home, if you can make those payments, you will also be able to move into the home. And why not? It’s partially yours!
However, there’s still more than just paying someone else’s debt that’s involved with being a co-signer. Because your name will be on all the documents, and because you’ll still be held just as responsible, being a co-signer can also affect your credit rating – especially if that first person doesn’t pay. Even missing just one payment can be enough to have your name sent to collections, tarnishing your credit score for the foreseeable future. You can always make that up of course, by making timely payments from here on in, and by calling the credit agency to get it off your record (or at least asking them to mark it as “paid.”) But still, it can be a real hassle, and one that you might not be prepared for when you originally agree to be a co-signer.
Before ever agreeing to be a co-signer on a home loan, make sure that the original mortgage applicant is someone you can trust, and that you come speak to us about it at CMI. We are the best mortgage company in Ontario and we’ll fully explain everything that goes along with being a co-signer – and help you decide whether or not it’s something for you.
