Residential Mortgage Commercial Financing Life Insurance
The AC Lending Weekly

Guarantor vs Co-signor

In today’s mortgage world of the stress test and other mortgage rule changes, there has been a marked increase in the number of people needing to add a family member to make their mortgage application work.  One of the common questions seems to be around the role of a guarantor compared to that of a co-signor.

So, what’s the difference???

Well when it comes to mortgages there are a few:

1) A guarantor is not on the title of the property just on the mortgage itself. So, the Guarantor does not have the same rights to the property as a co-signor would.

2) A co-signor is on the title and is liable without the bank needing to take any specific action to request payment.

The role of the guarantor is just to guarantee the mortgage itself i.e.: Make the payments if the primary borrower files for bankruptcy, stop making payments or passes away.  In those cases, the guarantor would then become responsible for the mortgage.

A few things to consider before agreeing to become either.

  • Do you trust the borrower to always make their payments on time?
  • Why does the borrower need a guarantor?
  • Can you afford to cover any missed payments?
  • Can you afford to cover the entire cost of the loan?
  • Can you trust the borrower to pay back the loan on time?
  • Are you worried that being a guarantor for a friend or family member might ruin your relationship?
  • Will being a guarantor affect your ability to secure your own loan in the future?
  • Will you have to put up your own assets as security?
  • What is the loan amount that you will be guaranteeing?
  • Can you take yourself off the contract at some point in the future?

As always discuss your options with a professional to review the pros and cons depending on your personal situation!

“Do right. Do your best. Treat others as you want to be treated”

Lou Holtz

Leave a Reply

Your email address will not be published. Required fields are marked *