Mortgage Co-Signor vs. Guarantor: What is the Difference?

If you are a borrower who is perhaps self-employed, have questionable income stability or employment history or mediocre credit, it’s likely that your lender will need a guarantor or cosigner for your mortgage. In their eyes, this will ensure them that someone will be held responsible if you areunable to make your mortgage payments.

Are you the person who is considering becoming the guarantor or cosigner, then you should understand the difference between the two, they are very different, as each comes with certain rights and responsibilities.

What is a Mortgage Co-Signor?

If you are considering becoming a mortgage co-signer this actually means you are becoming an owner of the property. You’re name will also be on the land title that is registered with the city or municipality. This makes you responsible for the mortgage payment (even if you don’t actually have to make any).

If someone has asked you to co-sign for them, they’ve asked you to do so to give strength to their mortgage application by adding your information and income. Once the borrower can qualify on their own, you can be removed at a later time in the future. However, keep in mind that this comes with additional costs for legal fees to change the property title.

What is a Mortgage Guarantor?

If the mortgage applicant has sufficient proof of income and employment history and stability, but has a credit history or score that doesn’t meet the necessary requirements, the lender will ask for a guarantor for the mortgage loan.

Should you need a guarantor or decide to become a guarantor for a borrower, know that the guarantor will also be responsible for the mortgage payments if the borrower defaults. However, before a guarantor can be added, they must be screened by a lender. During the screening process, the lender will look at the guarantor’s:

• Credit history, rating and score

• Income

• Net worth statement

As a guarantor, you will remain one for a number of years, therefore you need to think about these agreements and commitments carefully and weigh any personal, potential consequences. If the borrower defaults and the guarantor is unable to take over the payments it could affect their credit score/history and their ability to secure their own financing in the future. A guarantor should always review all documents before signing the mortgage agreement.

Regardless of whether you become a co-signor or guarantor for a mortgage you should always consult a mortgage agent or lawyer before signing anything to make sure you are fully informed and prepared.

Meghan Van Houten – Mortgage Agent
416-709-9062
[email protected]
Mountainview Mortgages
5038 Fairview Street, Burlington, ON L7L 0B4
Independently owned and operated
Lic# 12568