When applying for a mortgage you may be pre-approved for a less than what you need to get the property that you want. Alternatively you may not have good enough or no credit so it’s hard for you to be approved for a mortgage at all: That’s where a co-signer comes in.
A co-signer is usually a parent(s), grandparent(s) or a sibling with good income and credit that can help you increase the amount you are approved for a mortgage or solidifying your ability to get a mortgage.
There is a risk for the co-signer as they are taking a financial obligation by signing their name to the mortgage and going on title of the property and are equally responsible as the main borrower. If you are unable to pay your mortgage or property taxes, the co-signer will have to make the payments.
A co-signer is a great option to have for first time home buyers that may not have enough credit or enough work history to qualify for a mortgage on their own. Also, a single or newly separated borrower may not have enough income on their own to qualify that they need someone to increase their income.
If you do close on a property with a co-signer it doesn’t mean that that person will always have to be on the mortgage/title. As soon as you can qualify for a mortgage on your own after whatever was hindering your approval before is no longer an issue, the co-signer can be taken off title and the mortgage. At time of closing the lawyer can make the co-signer on title for only 1% so that once you are approved for a mortgage on your own, it’s easier and less expensive to have them taken off.
Having a co-signer may not be exactly how you wanted to buy a property but with the increasing property prices it may provide you with a way to enter the homeownership.
Tim Ward, Collingwood Mortgage Broker.
