Lifestyle

Of Prime Interest: Co-signing on the dotted line

What it means to be a guarantor or co-sign on a mortgage is to either help to secure the financing to purchase or refinance a home.

People often use the terms guarantor and co-signer interchangeably, however, each has  very different responsibilities and rights.

To begin with, a guarantor or co-signer will be required if the applicant is not able to obtain a mortgage approval independently.

That is usually due to poor credit, an inadequate down payment, insufficient employment history or questionable income.

Most mortgages will be approved if there is someone to back the borrower should he/she have any trouble making the payment.

A co-signer is basically a co-owner being registered on title and equally accountable for the payments although it is commonly known that individual will not make the payments.

Co-signers are typically used when you need to support the income of the mortgage applicant.

The co-signer will go through the typical application procedure which involves a credit check and disclosing all assets and liabilities as well as employment information.

They’re also  required to sign all of the mortgage documents and can expect to remain on title until such time as the applicant qualifies for the mortgage on the own.

The co-signer is truly a co-owner.

A guarantor personally guarantees the payments will be made if the original applicant defaults.

The guarantor has no claim to the property because he/she is not on title but as guarantor he/she does sign the mortgage documents.

A guarantor has to be stronger financially than a co-signer because he promises to carry the entire debt should the homeowner default.

During the application process, a guarantor will undergo a credit check and must disclose assets, liabilities and income.

It is a huge responsibility as the guarantor has fewer rights than a co-signer.

Their obligation is the same as a co-signer, however, a guarantor doesn’t have the luxury of being on title so they don’t have a claim to the property.

If the homeowner defaults on the payments and the situation deteriorates to the point that the homeowner cannot meet his/her obligations, the home will usually be sold and the guarantor will be responsible for the missed payments as well as any loss associated with the sale.

Most lenders will offer early release policies that free the guarantor from obligation (usually after 12 months) if the borrower is current with payments and has established good credit or employment history.

Before agreeing to act on behalf of an applicant,  co-signers or guarantors need to evaluate the commitment they’re willing to make for a default mortgage deal will reflect badly on their credit ratings.

 

We encourage an open exchange of ideas on this story's topic, but we ask you to follow our guidelines for respecting community standards. Personal attacks, inappropriate language, and off-topic comments may be removed, and comment privileges revoked, per our Terms of Use. Please see our FAQ if you have questions or concerns about using Facebook to comment.

You might like ...

Gas leak causes evacuation in Courtenay
 
Generous, anonymous donor improves health care for North Island women
 
Fundraiser scares up funds to fight diabetes
Organizers of annual fundraiser praying for snow on Mount Washington
 
Soldier killed in Parliament Hill siege
 
Bank shears off in a flow of mud
H1N1 flu returns, targets younger people
 
Town OCP passes
 
Passenger rail back on track

Community Events, October 2014

Add an Event

Read the latest eEdition

Browse the print edition page by page, including stories and ads.

Oct 24 edition online now. Browse the archives.