Last week we talked about what adding a co-signer to your mortgage application means as a buyer and how that can help you on your mortgage application. This week, I’m here to talk a bit more about how this impacts the co-signer ! Now that they have attached themselves to your mortgage, they are also attached to title of your property, so what does this mean for them ?!
We generally recommend that when meeting with your lawyer to finalize the deal, you discuss the option of registering ownership for the co-signers at only 1% of the property. When a property is sold and it is not your primary residence, whether it’s a rental property, a cottage, or a home you have co-signed on, you are responsible for paying capital gains based on the equity that was made from the sale. Registering with 1% ownership helps minimize your financial impact that capital gains brings.
When deciding to be a co-signer, it’s also important to keep your credit in mind ! This mortgage will now always appear on all co-signers credit applications going forward. When they go to refinance their own mortgage, purchase a cottage, or even look to lease a new car, the mortgage they’ve co-signed on and the payment amount, will reflect in their own credit history. This can impact your future borrowing needs.
It is important to be educated on the responsibilities that come with being a co-signer. It’s a lot more than just signing your name at the bottom of an application. What’s most important is that everyone involved in the purchase of your home is fully informed about what their role is and what it means for them. There should never be anything hidden in fine print at the end of the day! Adding a co-signer is a great option, and this has become a great resource in helping make a lot of dream home purchases come true ! Our goal is making sure that everyone is on the same page – no matter what decision we’re making !