Co-signers and Guarantors: When and How to Use Them

Getting help from family to qualify for a mortgage is common, especially for first-time buyers. But there's more than one way to do it. Understanding the difference between co-signers and guarantors—and the implications of each—helps you make the right choice.

Co-signer vs. Guarantor: The Difference

Co-signer (Co-borrower)

• Goes on title (owns part of the property)
• Fully responsible for the mortgage
• Their income and credit factor into qualification
• Their name appears on all mortgage documents

Guarantor

• Does NOT go on title
• Guarantees payment if borrower defaults
• May not be income-tested as heavily
• Less involvement in the purchase

When You Might Need Help

Common scenarios where family assistance helps:

• First-time buyers with limited income history
• Self-employed borrowers with complex income
• New Canadians without established credit
• High debt ratios that need additional income
• Credit challenges requiring a stronger applicant

How Co-signing Affects the Helper

If you're considering co-signing for someone:

Impact on credit:

• The mortgage appears on your credit report
• Affects your debt-to-income ratio
• May limit your own borrowing capacity

Risk:

• Fully responsible if primary borrower can't pay
• Your credit damaged if payments are missed
• May need to take over payments or face foreclosure

Considering a Co-signer or Guarantor?

Let's discuss your options and find the best approach for your situation.

Removing a Co-signer Later

Yes, it's possible, but requires refinancing:

• Primary borrower must qualify independently
• Typically done after income improves or equity builds
• May involve refinancing costs

Timeline: Plan for 2-3 years before attempting removal.

Alternatives to Co-signing

Before involving family, consider:

1. Larger down payment – Reduces amount needed to qualify
2. Gift for down payment – Help with money, not obligation
3. Wait and build credit – Sometimes patience is the answer
4. Alternative lenders – More flexible qualification

The Emotional Side

Co-signing involves more than money:

• Family relationships can be strained
• Clear expectations should be set
• Consider what happens if circumstances change
• Legal advice is worth the cost

FAQ

Q: Can my parents guarantee my mortgage if they still have their own?
A: Yes, but their mortgage affects their ability to help. Lenders consider their total obligations.

Q: Does a guarantor need to be a family member?
A: Typically yes. Most lenders require immediate family (parents, siblings, grandparents).

Q: If I have a co-signer, do I still need a down payment?
A: Yes. The co-signer helps with income/credit qualification, not down payment.

Q: What happens if my co-signer passes away?
A: The mortgage continues, but you may need to refinance depending on terms and your qualification.

What's Next

Explore your options with our team. We can help determine whether a co-signer or guarantor is the right approach—or if there are alternatives you haven't considered.