Co-signer for a mortgage: good idea?

Co-signer for a mortgage: good idea?

It is more difficult to qualify for a mortgage now than it has been in the past largely due to the infamous stress test but also because house prices are much higher. It’s especially difficult for first time home buyers; difficult to save up 5% of a $500K home and difficult to qualify for a $475K mortgage making a starting salary of $50K. Not to mention, difficult when the position is not full time permanent with years of history! What about a co-signer?

So how do you get into a home?

Many home buyers are turning to strong co-signers to help them bridge the gap. A “strong” co-signer is someone with good credit, good employment/income stability and history, and has disposable income. When I say disposable income, it means that their income is not swallowed up by their own debt. It’s not just how much you make, it’s how much you are left with after expenses!

Is it a good idea?

A strong co-signer can be a good idea IF the future prospects of the homebuyer are bright. Meaning, there should be a (short term) exit strategy for the co-signer where the home buyer will qualify on his or her own in the future, thereby releasing the co-signer from title on the property. Trust is a big aspect in this scenario. But, what the co-signer should keep in mind is that he/she is co-signing on a home, it’s not a depreciating asset like a car or even worse, an unsecured loan.

Sometimes getting a co-signer is a formality that just helps the home buyer jump through Governmental hoops.

Sean Howard is a Mortgage Broker. His office is located at 651 Fennell Avenue East in Hamilton, Ontario. If you would like to speak with Sean, he can be reached at 905-574-9200 #216. Alternatively, you can contact Sean here.

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