Buying a home is a significant investment and not everyone can do it on their own, especially when it comes to qualifying for a mortgage. Whether your credit score needs some improvement or your income isn't quite where it needs to be, a co-signer can act as a helping hand to bring you one step closer to final mortgage approval.

What is a co-signer?

A co-signer is someone who applies for a mortgage loan with the primary borrower and legally agrees to take liability on the mortgage and pay off the debt if the primary borrower is unable to make payments. A co-signer could be a parent, family member or trusted friend. They fill in the gaps where the primary borrower is lacking on their mortgage application by providing a strong credit score and a stable source of income to qualify.

Why do Canadians use a co-signer for their mortgage?

Co-signers are often used to help home buyers who are having a difficult time qualifying for a mortgage on their own. The borrower may either have too much debt or not enough income to afford their desired home and therefore seeks a co-signer. When you include a co-signer on your mortgage, they add the additional salary and any other requirements you may be missing on your application. This helps to increase your purchasing power and your chances for mortgage approval.

How you can use a co-signer

There are two ways you can involve a co-signer on your mortgage. First, the co-signer can become a co-borrower (or co-applicant as they are often referred as) and act as someone who is buying the home with you. In this scenario, the co-signer would provide additional financial security on the application. They would also be put on title of the home and be considered equally responsible for any mortgage debt.

The second option is to have a co-signer act as a guarantor. A guarantor is someone who vouches that you’ll pay your mortgage and in the event that you are unable to, they will be responsible to make those payments. For example, if the primary borrower files for bankruptcy, stops making payments or passes away, the guarantor would then become responsible for each monthly payment until the mortgage has been paid in full. In most cases, a guarantor’s name will not be added to the title of the property, however, it will be included on the mortgage contract.

What is required from a co-signer?

Given that co-signers are there to support a home buyer's mortgage application, they’ll need to have a strong credit history, little to no debts and a stable source of income. A key thing to remember is that there isn’t much of a difference between a co-signer and a co-borrower, as the responsibilities are the same. In the eyes of lenders, co-signers own the home just as much as the primary applicant does – even if they don't live there. This is why it’s important to ensure that your co-signer can be trusted to be a part of this investment with you. A factor that co-signers should bear in mind is that the mortgage they sign on will be reflected on their credit history and appear as their own personal debt.

Will the co-signer always have to be a part of my mortgage?

Having a co-signer doesn’t have to be permanent. Given that their role is to help you meet the requirements on your mortgage application, removing them would require you to fill those gaps on your own. In order to move on from your co-signer, you’ll want to ensure that your credit score has improved, you have little to no debt and your income is steady and sufficient enough to support the mortgage without them. This can take anywhere from six months to a year or more, depending on your individual circumstances. Removing a co-signer is also known as a covenant change and requires you to refinance your mortgage, which may cost you a prepayment penalty fee. You will also need to go through a re-approval process where your lender will determine if you’re able to qualify for the mortgage on your own and if removing the co-signer is feasible.

If you’re buying a home and having a hard time qualifying for a mortgage on your own, our team at Homewise is happy to help you navigate the co-signer process from start to finish. Working with over 30 banks and lenders, a dedicated Mortgage Advisor will guide you at every step and present you with the best mortgage options and help you reach your homeownership goals.

Get started by applying online in just five minutes. You can also check out our mortgage calculator to give you a high-level view of what you can afford.