Getting a mortgage cosigner

The ability to qualify for mortgages has become increasingly out of reach for many potential homeowners. Despite a respectable income, credit history, and a sufficient down payment, it’s still difficult for an average Ontarian to meet the mortgage requirements. Many Ontarians opt to find a mortgage cosigner to qualify for their home purchase mortgage. While getting a mortgage cosigner  can be a way to pass lenders’ requirements, it comes with unique conditions that you need to be aware of before you decide.

A mortgage cosigner shares the responsibility of paying back the mortgage alongside the homebuyer. If your friend or family needs help getting approved for a mortgage, you can become a co-signer on their application. Showing two individuals’ earnings and credit history rather than one assures lenders that the borrower will repay their loan over time. The combined income of two individuals is often enough to secure proper financing as per the lender’s requirements. A cosigner can be your parents or siblings who are willing to support you in purchasing a home in the increasingly tricky homebuyer’s market.

There is no real barrier to becoming a mortgage cosigner in Ontario. Any individual can become a cosigner as long as they have a reliable income and credit history. However, depending on the type of mortgage you choose, understandably, not everyone will be ready to take on such a significant commitment. Mortgage cosigners are usually family or partners who have a good reason for supporting you by taking on equal mortgage responsibility. Some mortgage lenders specifically look for the related cosigner to ensure they have a personal stake in the property, motivating them to carry their share of the responsibility. While having financial assets at the time of signing can help some lenders, the majority are more interested in how reliably a cosigner can make payments on your behalf if you are unable to.

There are two types of mortgage cosigners in Ontario; those who act as co-borrowers or guarantors:

Co-borrowers: Individuals who cosign a mortgage and get added to the title as a shared homeowner are called co-borrowers. They are considered equally responsible for paying back the mortgage. Cosigning with co-borrowers allows homebuyers to bolster their credit and income history, which can help them qualify for mortgages they otherwise wouldn’t be able to. Co-borrowers are the most common type of mortgage cosigner.

Guarantors: Guarantors act as a backer for the homebuyer and don’t have their name added to the home’s title. They don’t claim homeownership and are considered solely responsible for repayment if the home buyer defaults on payments. Mortgage cosigners in Ontario that act as guarantors take on a significant amount of financial risk and may find themselves paying for a house that isn’t theirs. Usually, mortgage lenders won’t accept a guarantor except as additional backing for an already strong applicant or if the mortgage is entirely based on the guarantor’s income and credit history.

Once you’ve found a mortgage cosigner, the following steps can help you prepare better for the process:

• When applying for a cosigned mortgage, having all your documentation to support credit, income history, and any potential relationship between yourself and the cosigner can help expedite the process and improve your credibility with the lender.
• It’s essential to be aware of the consequences of cosigning a mortgage. Consult with a real estate lawyer if necessary.

Getting a cosigner for a mortgage is a great way to get approved when your financial history is not enough to secure the home you wish to buy. However, it also means that you’ll need to find the right person to cosign the mortgage. As long as you’ve considered the details, you should be in an excellent position to find a lender willing to finance you.

Further Reading – Mortgage Cosigner

Should you cosign a mortgage?

Five things to know about cosigning

Mortgage Maestro can help you find the perfect lender for your cosigned mortgage!