Using a Co-Signer for your Vancouver Home Mortgage
Sometimes, getting an approval on your first Vancouver home mortgage has an extra hurdle that you might not have expected. The lender might be prepared to approve your mortgage providing that you have a co-signer. If that happens, you might be wondering what that entails and how it works.
Why a Lender Might Require a Co-Signer
There are several reasons a lender could insist on having a co-signer on your mortgage. The first thing to know is that you should not be discouraged by this request. It simply means that the mortgage lender is not entirely comfortable with your financial or employment situation.
You might only recently have been employed on your job or your employment history might be somewhat scant. Another reason is that you might be somewhat borderline when it comes to how the lender calculates your budget according to your debt ratio and your ability to comfortably handle mortgage payments. It could be you might not have much of a credit history or possibly due to some other reason such as your being self-employed for example.
The lender simply wants to be assured that the mortgage will be more fully secured. The fact that they are still considering you for a mortgage should be taken as a positive sign. You simply have to take that one extra step in order to secure your mortgage.
Responsibility of a Co-Signer
What are the responsibilities and what is the role of a co-signer on a mortgage? The co-signer is the person you’ve approached agreed to take on this very important role to secure the approval of your mortgage.
Most people who use need a co-signer generally use a family member such as a parent or sibling. You must be fully aware that if you renege on your mortgage payments, the co-signer assumes full and complete responsibility for making these payments.
A co-signer should not assume this responsibility lightly as the consequences could have a significant impact on their own financial situation and even on their credit rating should they not be able to fulfill this role.
You must be very clear on your own financial circumstances and only proceed with this route if you have complete confidence about your ability to pay the mortgage loan.
What a Lender Wants for a Co-Signer
A lender will not let just anyone be a co-signer. Essentially, a co-signer must also qualify for the mortgage in the same manner that you were initially approved. The lender will also carefully scrutinize the credit history, employment and income and debt capacity of the co-signer before they will approve the mortgage. So, you must choose your co-signer carefully if you wish to succeed in getting approved.
Removing a Co-Signer from a Mortgage
Should your financial situation improve you also have the option of removing a co-singer from your mortgage. This will be subject to the requirements of your particular lender. They may simply go ahead and do so or you may possibly have to apply for a new mortgage if the term has not fully expired.
You should also be aware that a co-signer also has the right to ask the lender to remove them from a mortgage which may require that you have to re-apply for a new mortgage or seek a mortgage elsewhere.
A Co-Signer can Also be a Co-Borrower
If you have problems in finding someone who meets the qualifications of a co-singer, there is also an alternative you might consider – using a potential candidate as a co-borrower instead.
A co-borrower would be considered as a co-owner of the property because you would be using your combined incomes as a means to pay the mortgage. This also requires that the name of the co-borrower is included on the property title, and jointly owns the property with you even though they don’t reside in the home.
If your financial situation improves, you can reapply for a mortgage and remove the co-borrower from the title and from the mortgage. A co-borrower doesn’t actually have to pay anything towards a mortgage but you must remember they are still a co-owner of the property so you must be fully aware of any potential legal ramifications before you opt for this type of mortgage arrangement.