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Co-signing Mortgages – Part II: Five Things A Co-signer Should Know

Co-signing needs eligibility

If you want to help a near and dear one to get a step closer towards their own home, you should first find out if you are eligible to come on board as a co-signer. Firstly, your finances will come under the scanner just like that of the primary borrower. It translates to your credit score, your debts, and even your income being subject to scrutiny. This is done to come to a conclusion whether you will be able to repay the loan taken by the primary borrower in case he defaults. If you have a poor credit score or are in a lot of debt yourself you won't be able to co-sign.

Co-signing is a commitment

If you have been approached by a friend or family to co-sign a mortgage you should know every detail about co-signing before you sign on the dotted line. Co-signing a loan is a commitment and it is very likely that if you co-sign, you are deemed a co-borrower along with your relative who is the primary borrower. Co-borrowing implies if the primary borrower defaults or is unable to make the payments towards the debt you are deemed responsible as well. Thus co-signing is a big commitment, one which you should be ready for, if you wish to sign. It is no surprise then that most co-signings happen with parents and children as co-signers, especially when the children are either moving out of their home and have recently taken up a job or if they are newlyweds.

Co-signing is voluntary and not an obligation

One generally comes on board as a co-signer when they want to help the primary borrower voluntarily. Thus it is an independent choice and not an obligation. So if you have even a nickel of doubt that the primary borrower will be mischievous or will not be able to make his payments on time, you should either not co-sign or talk to the primary borrower about such concerns before helping him or her.

Check if you are a co-signer or a guarantor

As a co-signer of the mortgage you also become its part-owner. The credit history of both the co-signer and the primary borrower will be considered during the approval process. But if you are a guarantor of the said loan you are guaranteeing a loan in case the primary owner does not pay up. The guarantor is not a co-owner of the home.

Ensure you have the following

If you have finally decided to co-sign the mortgage ensure that the primary borrower pays the monthly due amount on time so that your own credit score doesn't get affected. Also try to get mortgage life insurance or term life insurance to protect you in case of death or life-threatening illnesses. And finally, go through the fine print of the papers thoroughly before signing on the dotted line and keep a copy of the same with you.

With these handy points you are now ready to make your decision to be a co-signer or not. If you still have any doubts, reach out to us and we shall be happy to help.

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