What is the difference between a guarantor and a co-signor?

Author: Debbie Viveiros - Mortgage Agent | | Categories: Bridge Financing , Commercial Mortgages , Debt Consolidation , First Time Home Buyer , Mortgage Agent , Mortgage Broker , Mortgage Loan , Property Investment , Refinancing Mortgage

What is the difference between a guarantor and a co-signor?

Co-signors assume an equal portion of the mortgage liability as the primary borrower, their name appears on all of the mortgage documents and they are registered on the title. Most importantly, they have an equal responsibility in ensuring that the payments are made.
On that point, even though it’s generally understood that the co-signor will not be contributing towards the monthly payments (unless they’re a spouse, for example), their income and/or assets can be at risk in the event that the primary borrower defaults.

A guarantor doesn’t have the same property rights as a co-signor since their name is only on the mortgage and not on the title of the property. Their role is strictly to guarantee that the mortgage payments can be made in order to get mortgage approval.

Unlike a co-signor, the guarantor typically becomes liable for default only after the lender has exhausted all other means of collection against the primary borrower. Guarantors are typically in better financial standing than the primary borrower and, because they don’t own any stake in the home, generally assist out of compassion (i.e. a parent helping out an adult child). Generally once the primary borrower has had a chance to become more stable and improve his or her financial situation, both parties can request that the lender reconsider the application and remove the co-signor/guarantor from the loan.
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