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:

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