Back in the day, co-signing a mortgage for a child or family member was a pretty simple task. At one point it was as easy as a signature and you became the loan guarantor. Those good old days are long behind us, and the process of co-signing is much more involved.
In today’s market with the continuous tightening of rules and regulations, with the heavy attention on preserving our national economy, co-signing is quite different. Essentially, co-signing for a mortgage loan is the same as applying for a mortgage on your own. The lender is required to request proof of income, assets, liabilities, property ownership, credit worthiness, and outstanding mortgages. I find most co-signers are surprised and often offended that the lenders require so much information and documentation. Overall, it is for the benefit of the Canadian Economy that the rules of co-signing have been strengthened.
If you are going to be a co-signer, or are going to need a parent or family member to co-sign for you, this is what you need to know:
- A co-signer is financially responsible for the mortgage. If any payments are missed, the co-signer is responsible for keeping the mortgage up to date.
- When a co-signer applies for a mortgage of their own, any mortgage which they have co-signed factors into their qualification and counts as a liability.
- A co-signer is required to provide the same documentation as a regular borrower.
- Depending on the lender, a co-signer may be removed after 12 months as long as the primary borrower(s) qualifies on their own at that time.
- A co-signer is almost always registered to both the mortgage and to title (ownership) of the property.
In conclusion, being a co-signer is a major responsibility and the process is much more involved than in the past. Co-signing is not something you should take lightly, and for the sons and daughters reading this article, I hope this helps you understand how big a favour your parents are giving you.
Prepared by Doug Adlam