Are you considering co-signing a mortgage? It is great that you are in a position to help your loved one. We do many mortgages with co-signers where both the buyer and the co-signers are happy and confident in their decision. To be confident in your decision, it is important to understand what it means to be a co-signer and what impact it can have on your financial future. This is not a decision to be made lightly.
You’re fully responsible for the mortgage
As a co-signer, you need to be aware that you are taking on the same legal obligations as the primary borrower. This means that you are 100% responsible for the mortgage and you are guaranteeing that the mortgage payments will be made even if someone else is making those payments. You need to trust the primary borrower and have a way to monitor that the payments are being made.
You’re on the mortgage until they can qualify to remove you
You will not be automatically removed from the mortgage due to time. To have your name removed from the mortgage, the primary applicant needs to apply in their own name and qualify in their own name. Before co-signing, it is important to have a realistic discussion with the primary applicant and your mortgage broker to understand how long you will be on the mortgage.
Co-signing a mortgage impacts your debt service ratio
When you co-sign for a mortgage, ALL the debt of the co-signed mortgage is counted in your debt service ratios. This means that if you are looking to qualify for another mortgage in the future, you will have to include the payments of the co-signed mortgage in the calculations. This can significantly impact the amount that you can borrow in the future.
Final Thoughts
Co-signing a mortgage is a meaningful financial commitment that allows you to support a loved one in achieving their dream of home ownership. Trust, effective communication and a clear understanding of the terms are essential elements of a successful co-signing arrangement. Prior to making the decision to co-sign, have an open and constructive conversation with the primary applicant and seek guidance from a reputable mortgage broker. We want you to make a well informed decision that aligns with your long term goals and strengthens your relationships with your loved one.
Hi, I’m Jill, your mortgage pro. I am here to make the world of mortgages less confusing so you can feel confident in your financial decisions. Through my blog, I aim to provide you with the knowledge and guidance you need to make informed decisions. Your financial peace of mind is my top priority.
