Considering Co-Signing?

Karen Pacheco |

mortgage broker Edmonton AB

Are you or a client considering co-signing on a mortgage and have questions?

There tends to be some confusion about what it actually means to co-sign on a mortgage and you know that where there is confusion, we are here to offer you some clarity.. Let’s take a quick look at what you need to know before, during, and after the co-signing process.

What can you expect?

You will be required to complete an application and have your credit bureau pulled. As you are now considered a borrower, the bank or mortgage broker will ask you for all the documentation that the main applicant has already provided. This can include but will not be limited to:

  • Letter of employment
  • Paystubs
  • 2 years Notice of Assessments, Financial Statements and complete T1 Generals ➔ Mortgage statements on all properties you own along with property tax statements ➔ Bank statements (if helping with the down payment)
  • Lease agreements on properties you own (if applicable)
  • Divorce/separation agreement (if applicable)
What do you need to be aware of?
  1. This is now a monthly liability according to the world. You will have to disclose this debt on all your own applications going forward. It could affect your ability to borrow in the future.
  2. Each lender is different in their policy as to how soon you can come off the mortgage. Familiarize yourself with this. Be sure to select a shorter term if this is only a short term fix to ensure you avoid penalties from breaking a term early.
  3. The main applicant will need to be able to apply and be approved on their own in order for you to be removed as a co-signer. Are you committing to this indefinitely or only for a couple of years?
  4. Mortgages report on the credit bureaus so you could be adversely affected if there are late payments.
  5. If the main applicant cannot make the payment for whatever reason, by co-signing, you are saying that you will. Make sure your budget can handle that for a few months if a situation arose where you need to step in to make the required payments.
Things you may want to consider if you do agree to co-sign:
  • Ask for an annual statement to be sent to you as well on both the mortgage and the property taxes.
  • Consider a joint account for mortgage payments so that you can check in every so often to ensure all payments are being made on time.
  • Talk about life insurance! If the worst occurs, then at least have enough of a policy in effect, with yourself as the beneficiary, to cover a year of mortgage, taxes and bills so that you are not hit with an unexpected series of expenses until the property sells.