What’s the Difference Between a Guarantor and a Co-Signer?
Buying your dream home is something not all people have the means to do for many reasons.
They could be in a financial state where getting approved for a mortgage is extremely difficult due to bad credit or having a low income
However, there are ways to get your mortgage approved with the help of a co-signer or guarantor. For the uninitiated, these two terms may seem confusing or unfamiliar. This guide will help you understand the difference between the two and which option would be more suitable for you.
What Is a Co-Signer?
A co-signer is someone who signs the mortgage papers with you. This means they are equally responsible for repaying the loan with you. The co-signer essentially vouches for you, and their credit and financial history will be looked into during the loan approval process. If the co-signer has good credit and an adequate income, then the mortgage lender will give you a favourable approval decision.
What is a Guarantor?
A guarantor is a third party who guarantees the repayment of a mortgage loan taken out by someone else. In certain cases, a person may need a co-signer or guarantor to help them get approved for a mortgage. This is due to the fact that the lender would not approve a mortgage without the help of a guarantor. Some of the reasons for needing a guarantor may vary from person to person, but some of the common reasons are as follows:
Low Income
Bad credit
Unemployment
A guarantor has to be ready to pay the mortgage if the borrower doesn’t pay it. The full monthly payment is usually split four ways between the borrower and the guarantor. For example, if the monthly payment is $1000, then the borrower will make $250 while the guarantor will make an equal $250 payment. If the borrower stops paying their side of the monthly payment, it will be up to the guarantor to repay the remaining $750 that the borrower would have paid.
Should You Use a Guarantor or Co-Signer?
So what is better in this case, a guarantor or a co-signer? That depends on the circumstances and the type of mortgage you’re looking for. If you don’t have a guarantor, you will most likely be required to have a co-signer to apply for a mortgage. You may have to have the co-signer in place even if you have a guarantor. The lender will often ask for a co-signer even if you have a guarantor. So, it’s best to contact a mortgage lender to see what their requirements are.
Why Are There Different Requirements?
Different lenders always have different requirements due to the fact that each lender has different lending guidelines. Some lenders may have stricter requirements than others because of this. This is why it’s essential to talk to a lender in your area to find out what your options are. You should not be afraid to go to multiple lenders and compare to find the best and most convenient deal for you.
What Are the Benefits of Having a Co-Signer or Guarantor?
If you do not have a guarantor and want to get a mortgage, you will most likely be required to have a co-signer. This is because a guarantor is usually only needed for people who do not have a co-signer.
Some of the benefits of having a co-signer or guarantor are as follows:
Lower interest rates
Low monthly payment
Fewer obstacles to getting approved for a mortgage
THE BOTTOM LINE
Having a co-signer or guarantor will help you get approved for a mortgage and buy your dream home. Many people need confidential credit help and a guarantor to get approved. The best way to find out if you need a guarantor or a co-signer is to first go to a lender to determine their requirements.
Level Up Mortgages is here to help you find the most suitable mortgage for your needs. By simplifying the mortgage journey for new buyers, we make sure you find the best mortgage deal in a quick and simple way. If you're looking for a trusted mortgage broker in Canada, Level Up Mortgages is the one to call. Contact us today to apply!
See what you qualify for or contact Paul to get your pre-approval.
Paul Davidescu (www.levelupmortgages.com)
Level Up Mortgages
604-809-3188
paul(at)levelupmortgages.com
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