co-signing a mortgage
TRANSCRIPT
Jackie Woodward Mor t gage B roke r. T MG
780.433.8412 in fo@ m or t g ag e g i r l . ca
CO-SIGNING A MORTGAGE
Whether you are the borrower who needs a co-signer or someone has asked you to co-sign for them in securing
a mortgage approval, you should fully understand all of the implications involved before you commit.
The mortgage landscape has changed a lot over the
last couple of years and as a number of new mortgage rules have come into effect it’s not as easy to qualify
for a mortgage as it was 5-years ago.
CO-SIGNING A MORTGAGE
Jackie Woodward // Mortgage Broker // TMG // 780.433.8412 // [email protected]
As a result of these changes I have seen an increase in co-signers required so this week I want to cover the 5 “must knows” about co-
signing for a mortgage.
CO-SIGNING A MORTGAGE
Jackie Woodward // Mortgage Broker // TMG // 780.433.8412 // [email protected]
Jackie Woodward Mor t gage B roke r. T MG
780.433.8412 in fo@ m or t g ag e g i r l . ca
WHAT IS A CO-SIGNER?
If a borrower has weak credit or their income does not support the mortgage amount they have applied for, a
co-signer may be requested.
A co-signer is an additional borrower put onto the mortgage application in order to add strength to the
approval of the mortgage financing.
The idea being, the stronger the application, the more appealing it is for a potential lender to approve the
financing.
WHAT IS A CO-SIGNER?
Jackie Woodward // Mortgage Broker // TMG // 780.433.8412 // [email protected]
You can have more than one co-signer on an application, an example of this is two parents co-
signing for their child who is buying their first home.
Keep in mind the purpose of a co-signer is to improve the odds of a mortgage approval, so a weak borrower
would not make a good co-signer in this situation.
In addition to a co-signer going on the mortgage (the debt) they will also go on the accompanying property
land title (the asset).
WHAT IS A CO-SIGNER?
Jackie Woodward // Mortgage Broker // TMG // 780.433.8412 // [email protected]
Jackie Woodward Mor t gage B roke r. T MG
780.433.8412 in fo@ m or t g ag e g i r l . ca
WHAT IS A STRONG
CO-SIGNER?
The financial profile of a suitable co-signer will be dependent on why a co-signer is required.
If the main borrowers credit is weak, the lender will be looking for a co-signer who has a strong credit history though if the primary borrowers
qualifying income is hard to prove, the co-signer will have to have a strong reliable income source
with minimal debt.
WHAT IS A STRONG CO-SIGNER?
Jackie Woodward // Mortgage Broker // TMG // 780.433.8412 // [email protected]
A suitable co-signer has to look good where the main borrower doesn’t.
WHAT IS A STRONG CO-SIGNER?
Jackie Woodward // Mortgage Broker // TMG // 780.433.8412 // [email protected]
Jackie Woodward Mor t gage B roke r. T MG
780.433.8412 in fo@ m or t g ag e g i r l . ca
WHAT IS THE DIFFERENCE BETWEEN A
CO-SIGNOR AND GUARANTOR?
A few notable mortgage terms to
differentiate between are a co-borrower, co-signer, and guarantor.
WHAT IS THE DIFFERENCE BETWEEN A CO-SIGNOR AND GUARANTOR?
Jackie Woodward // Mortgage Broker // TMG // 780.433.8412 // [email protected]
A co-borrower is just another applicant, such as the spouse or siblings buying a
house together. All borrowers are qualifying together and all will likely owner occupy the subject property.
WHAT IS THE DIFFERENCE BETWEEN A CO-SIGNOR AND GUARANTOR?
Jackie Woodward // Mortgage Broker // TMG // 780.433.8412 // [email protected]
Whereas a co-signer is usually brought on to add strength to a mortgage application
where the main borrower lacks and it’s not unusual for the co-signer to owner
occupy a different property.
WHAT IS THE DIFFERENCE BETWEEN A CO-SIGNOR AND GUARANTOR?
Jackie Woodward // Mortgage Broker // TMG // 780.433.8412 // [email protected]
A guarantor is not as common as a co-signer as future liabilities and
implications for a guarantor can be quite different than that of a co-signer
depending on the specific transaction.
WHAT IS THE DIFFERENCE BETWEEN A CO-SIGNOR AND GUARANTOR?
Jackie Woodward // Mortgage Broker // TMG // 780.433.8412 // [email protected]
A guarantor would personally guarantee the mortgage repayment in the event the
primary borrower does not pay.
WHAT IS THE DIFFERENCE BETWEEN A CO-SIGNOR AND GUARANTOR?
Jackie Woodward // Mortgage Broker // TMG // 780.433.8412 // [email protected]
A notable difference with a guarantor is that a guarantor will only go on the
mortgage (the debt) and not on the title of the property (asset).
WHAT IS THE DIFFERENCE BETWEEN A CO-SIGNOR AND GUARANTOR?
Jackie Woodward // Mortgage Broker // TMG // 780.433.8412 // [email protected]
Jackie Woodward Mor t gage B roke r. T MG
780.433.8412 in fo@ m or t g ag e g i r l . ca
HOW IS THE CO-SIGNOR AFFECTED
As a co-signer on a mortgage, you are now 100% responsible for that debt even if the primary borrower
makes all of the payments from their own bank account.
In the case of a mortgage loan, this not only applies
to the principle and interest payments, but also to the property taxes and condo fees if applicable.
Basically, if the primary borrower doesn’t pay, the lender will be calling you to make the payments.
HOW IS THE CO-SIGNOR AFFECTED
Jackie Woodward // Mortgage Broker // TMG // 780.433.8412 // [email protected]
Further to that, the lender often doesn’t notify you, the co-signer, of any delinquent payments until the loan is already significantly behind and has already negatively affected your credit rating which could
affect your future borrowing potential.
Make sure you are receiving regular statements during the mortgage term to ensure payments are
up to date.
HOW IS THE CO-SIGNOR AFFECTED
Jackie Woodward // Mortgage Broker // TMG // 780.433.8412 // [email protected]
The co-signer also needs to be aware ALL of the costs associated with this new home as you will
now have to disclose on any future credit applications you enter into.
This can impact how much you can borrow in
the future.
HOW IS THE CO-SIGNOR AFFECTED
Jackie Woodward // Mortgage Broker // TMG // 780.433.8412 // [email protected]
Jackie Woodward Mor t gage B roke r. T MG
780.433.8412 in fo@ m or t g ag e g i r l . ca
REMOVING A CO-SIGNOR
The primary borrower cannot make any changes to the mortgage without the consent of the co-signer.
When you are ready to remove your co-signer, you need to contact the lender to determine what their procedures are, or you can prepare by asking the
question upfront.
REMOVING A CO-SIGNOR
Jackie Woodward // Mortgage Broker // TMG // 780.433.8412 // [email protected]
If your intention was to only have the co-signer on the mortgage and the land title for a short period of time, you may want to initially choose to go with the lender
who has policies and procedures that are going to work for all.
Ideally, if you got a great rate for a 5 year closed fixed term, and believe you will qualify on your own without
the co-signer after the first year, you would want to work with a lender who will change the ownership of
the home without having to break the mortgage term.
REMOVING A CO-SIGNOR
Jackie Woodward // Mortgage Broker // TMG // 780.433.8412 // [email protected]
Jackie Woodward Mor t gage B roke r. T MG
780.433.8412 in fo@ m or t g ag e g i r l . ca
CO-SIGNING A MORTGAGE
May 30, 2014 brought a major change to the co-signing rules of a CMHC insured mortgage; it states an individual can no longer be a co-signer on a new CMHC
mortgage if they already have a CMHC insured mortgage.
This is a pretty significant change though the good
news is there are still two other insurer options available in Canada, Genworth and Canada Guaranty in
addition to a number of uninsured options.
CO-SIGNING A MORTGAGE
Jackie Woodward // Mortgage Broker // TMG // 780.433.8412 // [email protected]
If you’ve been declined for a mortgage and require a co-signer, talk with your favorite mortgage
professional about what the lender will be looking for in order to grant financing approval.
If a co-signer is not an option for you, discuss a plan of
action for you to get your financial profile to a level that lenders will like sometime in the future..
CO-SIGNING A MORTGAGE
Jackie Woodward // Mortgage Broker // TMG // 780.433.8412 // [email protected]
MORTGAGE QUESTIONS? LET’S CHAT!
JACKIE WOODWARD
MORTGAGE BROKER, TMG PHONE: 780.433.8412
EMAIL: [email protected] FOLLOW @MORTGAGEGIRLCA