A “guarantor” is someone who guarantees the mortgage on behalf of the mortgage holder in case the mortgage holder cannot pay back the loan payment.

Typically, a guarantor is required when the buyer has a damaged or poor credit history OR lacks sufficient income to qualify for the loan. Adding a guarantor can help reduce risks and add extra security to prevent mortgage defaults.

It is important to note that a guarantor is not a co-signer. Here are some facts about guarantors and what makes them different from a co-signer:

1. The guarantor must be a spouse or immediate family member. A Co-signer could be a friend or distant family member.

2. A guarantor typically does not have their name on the property title but will be on a mortgage. In the case of a co-signer, the name is generally on both the title of the property AND the loan.

3. Guarantors cannot qualify for their mortgage or large loans if they are responsible for guaranteeing a different loan.

4. There is a heightened risk on the side of the guarantor as they are responsible for the entire mortgage amount should the borrower default. To qualify, they must meet the requirements for credit check, income, liabilities and assets. Any guarantor should seek legal advice before signing the loan to ensure they understand the contract.

Whether you want to be a guarantor for someone else’s mortgage, or you need one for your own, be sure to talk to your mortgage expert before making any decisions. Your mortgage professional can help you review your options and explain the terms of the agreement or answer any questions you may have.