Co-Signer vs Guarantor
With the current costs of homes, interest rates higher than the last few years, and stringent stress tests, first time buyers are finding it more and more difficult to qualify on their own. We are often asked about co-signers so we thought we would share some info.
A co-signer should be an immediate family member or spouse, be able to contribute to the mortgage payment and will go on title of the property. They sign all the same mortgage documents as the purchaser, and they share equal responsibility for the debt. Being a co-signer can affect further qualifications for other loans and mortgages and the debt will appear on their credit bureau. It's important to remember that a co-signers income and current debt is taken into consideration.
A guarantor should be an immediate family member or spouse who can provide a guarantee the mortgage debt will be paid. However, they will not be on title of the property and have no ownership in the property. A guarantor won't be called upon to repay debt unless the mortgagor defaults. Unlike a co-signer, the mortgage debt will not appear on their credit bureau. Not all lenders will allow for a guarantor but instead ask for a co-signer.
Even though there are general guidelines for co-signers and guarantors, each lender will look at the whole deal differently and adjust their requirements depending on the risk.