Using a Guarantor
Using a guarantor or co-signer will assure payment responsibility if the primary borrowers default. This will enable the applicant to qualify for a mortgage, if on their own; the applicant(s) have to poor credit and/or insufficient income. A guarantors name may be on the loan but not the property. Conversely, a co-signers name will appear on both title and the loan.
There is a significant amount of risk involved in agreeing to be a guarantor or co-signer. If the borrower defaults, they are responsible for the full amount of the mortgage. So, lenders require them to qualify as if they were the sole applicants for the loan. Like a primary applicant, the lender will require a credit check and discloses of income, liabilities, and assets. Further, a guarantor or co-signer will want to consider how this would affect their ability to qualify for a loan in the future. Important to consider, this loan will be treated as if they have sole liability and included in their debt servicing calculations.
A Guarantor must consent to having their credit checked and provide evidence of income that will meet mortgage-lending policy. With this in mind, it’s important to remember that guarantors are taking on responsibility if the borrowers don’t make payments.