A borrower might consider getting a cosigner if they are worried that their income or credit score could make it difficult to qualify for a mortgage. A cosigner assumes the same responsibility as the mortgage borrower, even if they do not live in the home. Therefore, even if cosigning a mortgage in Ontario can help your loved one get approved, you should understand the pros and cons of co-signing a mortgage.

What does being a cosigner on a mortgage entail? According to our mortgage broker Toronto, as a co-signer, you commit to taking on the monthly mortgage installments if the mortgage borrower fails to pay. A cosigner serves as a guarantee that the mortgage will be repaid. Therefore, a cosigner’s income, credit history, and credit score could boost an otherwise weak borrower’s mortgage application.

Who can cosign a mortgage in Canada? Anyone can be a co-signer. However, for the mortgage lender to approve, the cosigner must be financially sound. It must be evident that the cosigner can take on the monthly payments if the borrower is unable to pay.

What Does ‘Cosigning a Mortgage Mean?

Usually, a mortgage applicant will get someone to cosign their mortgage loan if their income and credit score cannot allow them to qualify for a mortgage. By cosigning a loan in Canada, you agree to pay the loan if the borrower defaults or is unable to afford the monthly payments. You will not enjoy the benefits of the mortgage, but you will remain a co-borrower until the buyer pays off the mortgage. You could also cease to be a co-borrower when the applicant becomes financially stable and has you removed from the contract.

When you co-sign a mortgage loan, you give the lender an assurance that loan payments will be made, irrespective of whether the primary borrower is the one making them. When an applicant has a cosigner, they will have an easier time qualifying for a decent loan amount, payment plan, and interest rate.

Before you cosign a mortgage, you should understand that you are taking on a big risk. In most cases, cosigning happens between family members. For example, a parent could cosign a mortgage for their child. An adult child can cosign a mortgage for a parent. You could also cosign a mortgage for your sibling.

Typically, cosigning a mortgage is necessary when the applicant has poor credit. For example, a new graduate with a short employment history or poor credit may not qualify for a mortgage. In this case, they will require a cosigner for their first-time home purchase.

What is the Difference Between Co-Signed Mortgage and Joint Mortgage?

It is important to understand the difference between a cosigned mortgage and a joint mortgage. As a co-signer, you can own a stake in the home. However, this will only be possible through an arm’s length arrangement. With a joint mortgage, there is a level of cohabitation. For example, if you live together with your partner, you can choose to buy a home together, even if this is not always the case. In a joint mortgage, two or more people share the ownership of a property. Both owners have an equal right to the property, and both are responsible for repaying the property.

If the primary borrower dies in a cosigned mortgage, the cosigner may still have to repay the loan even if they will not gain ownership of the property. In a joint mortgage, if one of the borrowers does, the living one becomes the owner of the property. In a joint mortgage, all the parties are responsible for liabilities associated with the property, but a cosigner is only responsible for repaying the loan.

Who Can Be a Mortgage Cosigner?

What are the mortgage co-signer requirements in Canada? Anyone can qualify as a mortgage co-signer in Canada. However, this doesn’t mean that every other person should cosign a loan. Most people use their parents as cosigners. In the case of retired parents, their adult children can serve as cosigners. Many parents want to see their children succeed, which explains why many parents assume the cosigner’s responsibility. From a financial perspective, your parents may have higher savings, a long employment history, and more value accrued in home equity than you, especially if you have just commenced employment.

Can you buy a house with a cosigner? Perhaps you graduated recently, and you have a good job and money, but not good enough to make you qualify for a mortgage. You will have a higher chance of being approved if your cosigner has good financial health.

Does the mortgage cosigner have to be on the title in Canada? The cosigner will go into the title of the mortgage and the home, especially if their income is being used. However, if only the cosigner’s credit is being used, they could be left off the title.

Mortgage Cosigner vs Mortgage Guarantor

The obligations of a mortgage cosigner and guarantor are almost the same, but they differ a little. Both the cosigner and the guarantor are third parties who use their incomes or financial health to increase the borrower’s chances of having their mortgage approved. Both of them are responsible for the mortgage payments if the borrower fails to pay. If you are a mortgage guarantor, your credit score can be adversely affected if the lender forwards your details as the guarantor to any of the credit bureaus in Canada.

In spite of the similarities between cosigners and guarantors, two main differences stand out. First, the cosigner’s name will appear on the property title, but the guarantor’s name will not. The cosigner has to sign the mortgage agreement together with the primary borrower, but the guarantor does not have to sign the agreement. A cosigner may have a right of ownership, but guarantors do not have any rights of ownership even if they assume similar payment responsibilities as the cosigners.

Usually, a guarantor steps in to help strong mortgage applicants who only need a slight backup. On the other hand, a cosigner is essential for mortgage applicants who might be denied a mortgage due to poor credit scores or financial health.

Mortgage Cosigner vs Mortgage Co-Borrower

Both a mortgage cosigner and co-borrower are responsible for the loan repayment. When determining the loan terms, the lender will consider the incomes and credit histories of the cosigner and co-borrower, along with those of the applicant. Unlike a co-borrower, a cosigner cannot receive the proceeds of the loan and doesn’t possess any ownership right to the object of the loan. Usually, the co-borrower and the primary borrower have joint ownership of the property in question. For example, if two people purchase a home together, they are co-borrowers.

On the other hand, even if a cosigner will be on the title, they do not have ownership rights to the item of the loan. A co-borrower buys into a percentage of the home. A co-borrower goes through a similar application process and mortgage stress test as the borrower.


In a Nutshell

Mortgage Cosigner

The cosigner’s name is on the title, even if they don’t necessarily own the property

A cosigner must sign the mortgage loan application

Will be responsible for the payments if the borrower defaults

You have part ownership in the home

Mainly used by applicants with poor credit and financial health


The guarantor’s name is not on the title, and they do not own the property

Doesn’t have to sign the mortgage applicant

Guarantees the loan payments even if the borrower doesn’t pay

You have no ownership of the property

Use by stronger applicants who just need a boost to their title


Their name is on the title, and they have ownership of the property

Must sign the mortgage application

The responsibilities of the payments are split between you and the other borrower

You have part ownership of the home

Used by applicants who split the debt with another person for joint ownership of the property

Should You Be a Cosigner for a Mortgage Loan?

If your friend or family member requests you to cosign their mortgage, you are probably wondering – should I be a cosigner? In the event of a default by the primary applicant, the cosigner is legally responsible for the loan payments. Therefore, before you agree to cosign a mortgage, you should fully understand the implications and ensure that you are capable of taking on this obligation. If the primary borrower defaults, you could be responsible for the payments until the entire mortgage is repaid, and this is a huge financial responsibility.

If the primary applicant frequently makes late payments, it could adversely affect the cosigner’s credit. The mortgage is factored into the co-borrower’s debt service ratios, meaning that the cosigner’s ability to borrow in the future could be reduced. If you cosign a mortgage, prospective lenders may assume that you are overstretched.

Questions to Ask Yourself Before Making a Decision to Become a Cosigner

Can You Cosign a Mortgage if You Already Have One?

Yes, you can be a cosigner even if you have a loan. However, you should note that you will be adding more debt to your credit. If the primary borrower cannot repay the loan, you will inherit any late payments. Provided you qualify for the payments on both mortgages, you can become a cosigner even if you already have a mortgage. Before you become a cosigner, you should carefully consider what will happen if you are required to make payments for the cosigned mortgage.

Who is the Owner of the Property?

Regarding the property itself, the primary applicant holds most of the main rights and responsibilities. The main role of a cosigner is to ensure that the mortgage is paid on time when the borrower cannot afford to repay the mortgage. Even if your name is on the application and the property title, you are not the property owner.

Does Cosigning a Mortgage Hurt Your Credit?

Cosigning a mortgage could adversely affect your credit score if the primary applicant doesn’t make payments on time. Both the borrower’s and the cosigner’s credit reports are attached to the mortgage. This also means that if the primary mortgage borrower makes timely payments, your credit score will gradually get better. Therefore, you choose to be careful in deciding whether to cosign a mortgage since your credit score is at stake.

Can a Cosigner Be Removed if He Wishes To?

You may request a “cosigner release” to remove yourself as a mortgage cosigner. When you are no longer a cosigner, you will no longer be responsible, even if the primary borrower can no longer make payments. However, the borrower must sign the release and the lender must approve it. The lender is not likely to approve the release if they suspect that the homeowner will not be able to handle the mortgage payments alone. The cosigner is legally obligated to repay the loan if the borrower defaults. A cosigner release is usually a relief.

What Documents Would You Need to Become a Cosigner for a Mortgage Loan?

To become a cosigner, you have to provide documents or proof showing that you can afford the mortgage payments if the borrower is unable to pay. Although there are some exceptions depending on the lender, most lenders will only accept you as a cosigner if you have good creditworthiness and a high income. Before approving you, the lender could inspect the following:

  • Your credit report, payment history and credit score
  • Your residency and identification details
  • Your assets and liabilities, including your properties and current debts
  • Your paychecks or proof of income or latest bank statements

The cosigner evaluation occurs when the borrower applies for a mortgage. You should be prepared for a hard credit inquiry/check. This check could lower your credit score and will remain on your credit for several years. When cosigning a mortgage, you must provide documents like your photo ID, driver’s license, passport, or Medicare card. Ensure that you read all the paperwork before signing and retain some copies of the paperwork for your records.

Here Is What to Look Out For If You Decide to Become a Cosigner

Check your finances and credit rating
The most important things when cosigning are your income and credit.

Avoid missed payments
Missing payments on loans could lower your credit score, making you ineligible to cosign.

Understand the legal and financial implications of cosigning
Being a cosigner not only affects your income and creditworthiness but could affect your taxes and real estate.

Request for borrower’s mortgage information
Since you will be responsible if the buyer misses some payments, you should have access to their mortgage information.

Request for copies of the paperwork
Have the physical and digital copies of all the paperwork involved to protect yourself from the borrower’s negative actions.

Consider how cosigning affects your capital gain taxes
Because the property is partially under your name, you might have to pay taxes on the equity it accumulates.

Reduce the tax implications
You can do this by seeking a 1% ownership of the property. This compensates you for any tax implications in the future.

Advise the borrower to get life insurance
If the buyer dies or becomes disabled, the life insurance can repay the mortgage.

Understand the period of commitment
A mortgage could take decades to repay. Ensure that you understand how long you are committing yourself.

It’s not a responsibility to cosign for anyone
Think hard about the borrower’s character and financial stability before you cosign.

Why Would You Refuse to Be a Cosigner for a Mortgage Loan?

When your friend or family member requests you to cosign their mortgage, you may be quick to say yes due to the emotions involved. However, you should think carefully before cosigning to ensure that you protect yourself too. There are several instances when saying no to cosigning a mortgage may be the best option.

You Intend to Borrow Money Soon

Cosigning a mortgage decreases your credit score and ability to borrow money in the future. If you plan to borrow a loan, cosigning may reduce your eligibility. Even if you do not intend to borrow money right away, circumstances could change quickly and affect you when you are ready to apply for a loan.

You Doubt the Borrower’s Ability to Pay

You will be legally responsible for repaying the loan you cosign if the borrower fails to repay. Therefore, if you doubt the borrower’s ability to repay the mortgage, you should probably not sign for them.

Your Credit is not Good

Usually, you need to have stellar credit to qualify as a cosigner. If you cosign and your credit is not good, your credit score could decrease to the point where lenders will see you as a threat. It could take years to rebuild your credit.

The Borrower is Not a Close Family Member/Friend

Cosigning a loan is a huge financial responsibility. You should only cosign for a close family member or friend whom you know well and understand their character. A close relative is less likely to take off, leaving you to repay the loan.

What Are the Pros and Cons of cosigning a Mortgage?

Pros of Cosigning a Mortgage

There are several pros to cosigning a mortgage for the primary borrower. The borrower will be eligible for a loan or mortgage that they would not have qualified for on their own. In some cases, the borrower may even access a lower financing rate upon providing a co-signer. When you cosign a mortgage for a friend or relative, you will have the satisfaction of helping your loved one to acquire their dream home and start the journey of establishing their credit profile. You do not have to remain a cosigner forever. When several years pass and the borrower can acquire a mortgage on their own, you can cease to be a co-signer. However, this will only happen when the borrower qualifies to borrow a mortgage on their own. On the other hand, the borrower can replace you with another co-signer. You will also cease to be a cosigner if the borrower sells the property.

Cons of Cosigning a Mortgage

You should carefully consider the several disadvantages of cosigning a loan before you commit yourself. If you intend to borrow a loan in the near future, cosigning will place some restrictions on your ability to do this. Cosigning will adversely affect your debt-to-income ratio. If the primary borrower is late on the mortgage payments, the late payments will also affect your credit score. If the primary borrower is unable to repay the mortgage or is late on the mortgage payments, you will have to pay the mortgage installments from your pocket. If you cannot manage to pay the monthly installments, the lender could seize any property that was used as collateral for the mortgage. This will automatically affect your credit score adversely. In addition to the negative implications on your income and credit score, cosigning a mortgage could also put a strain on the relationship between you and your family member or friend. Therefore, before you cosign a mortgage, you should ensure that the mortgage borrower is someone you fully trust. You should also have confidence in the borrower’s ability to repay the loan. Cosigning could also have legal and tax implications. For example, you may have to pay taxes on the equity accumulated on the property acquired by the borrower.


Advantages Of Mortgage Refinancing

Makes it easy for potentially unqualified applicants to secure a mortgage.

The homeowner has peace of mind since the cosigner will help in repaying the mortgage in case of a financial difficulty.

The cosigner gets peace of mind for helping their loved one.

The borrower can access better interest rates and mortgage terms.

Disadvantages Of Mortgage Refinancing

Cosigning a mortgage is a huge financial responsibility for the cosigner.

It could affect the cosigner’s ability to acquire a loan in the future.

If the borrower makes late loan payments, it could affect the co-signers credit score.

The cosigner may have to pay taxes on the equity built on the home even if they don’t own the home.

What Are the Alternatives to Cosigning a Mortgage?

Perhaps you don’t feel comfortable cosigning a mortgage for the borrower, but you still want to assist. There are other ways of helping someone without being responsible for the mortgage.

You can help the borrower with the down payment: This way, you will reduce the loan amount, and the chances of approval without a cosigner will be higher. You could lend the money to the borrower or help in the form of a gift. By giving the down payment as a gift, the borrower will not be further extended with their credit.

Lend your money to the borrower: If you are in a position to fund the loan using your savings, this could be another option. You could charge the borrower some interest on the loan. However, you should be prepared to lose your money if something unexpected happens.

Help the borrower find another loan source: Just because one mortgage lender requires a cosigner doesn’t mean all lenders will ask for a cosigner. Every lender is unique and has unique lending requirements. If you help the borrower shop around, you might end up getting a lender who doesn’t require a cosigner. Do not settle for the first lender you interact with.

Cosigning a Mortgage a Loan or Not – Final Thoughts

If it is your first time to co-sign mortgage loan, you are probably wondering: how does cosigning a mortgage work in Canada? In the event of loan default, the cosigner is responsible for the loan payments. It is important that you fully understand what cosigning means to ensure that you are ready to take on this responsibility. When you cosign mortgage Canada, you could be responsible for the payments until the mortgage is repaid in full, which is a significant financial burden. Your credit score could also suffer if the borrower makes late payments. The mortgage will be factored into your debt service ratios, meaning that it might affect your ability to access a loan. You should only cosign a mortgage if you know the buyer and understand their character and ability to pay. Ensure that you understand all the paperwork and the mortgage terms.