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A co-signer is often a family member, friend or relative who signs the mortgage with you. He or she is a co-borrower & co-owner of the building.
We take on a co-signer mainly for 2 reasons:
Let us say that you are currently self-employed and looking for a mortgage; you may be making a lot of income but for fiscal reasons, you are not able to account for all of it. Lenders will usually ask for 2 years' worth of Notices of Assessment (NOA) to verify income stability and recurrence. They will then average the two last NOA incomes or take the most recent year, the lowest of the two amounts.
If you have just started as business for yourself, you may not be able to show the last 2 NOAs. The bank may then ask you for a temporary co-signer until you can file your second tax return and get the mortgage on your own. You need to make sure you declare enough income to qualify for the mortgage on your own, without your co-signor’s income.
Sometimes your credit score is too low, and the bank is not comfortable lending you the money without a co-signer. This is a big responsibility for the co-signer, and it will affect their borrowing abilities so long as they are on your mortgage. Thus, the sooner they can be removed, the better for all parties and your relationship with them.
You must be able to qualify on your own for the exact same loan amount (or more) and the same amortization period, based on your income and credit rating. Then, your co-signer’s name will be removed from the title of the property and the loan.
Let us say that your brother-in-law and his wife want to buy a house. They have all three elements required to get a mortgage: down payment, income, and the credit score. They go to their mortgage broker but do not qualify for the mortgage because they have a big debt load. Why? The mortgage they co-signed for you 3 years ago!
This stresses them out, as they are expecting a child and are looking to move into their new home soon. You are doing your best, but your credit rating is simply too low… The risk of internal strife and stress increases dramatically, and they may even ask you to sell your property if no other solution is found!
There are solutions available to you during a bank refusal to withdraw a co-signer. Thanks to our multitude of B and alternative lenders, it is possible to refinance the property and then withdraw your co-signer’s name. This will help you keep your home; they can buy theirs and the relationship remains intact. For more information or to take the first step towards resolving your situation, complete our online form right now! You will be glad you did!