Asked to co-sign? What to know before co-signing a mortgage or loan

With rising home prices and interest rates in Canada, co-signing has become a more popular option to help make the goal of homeownership a reality. In 2004, 4% of all mortgages issued to first-time homebuyers were co-signed with a parent. As of 2025, that number has jumped to nearly 11%.*

Co-signing can be a valuable tool for first-time homebuyers, but there are several considerations for both parties involved. Whether you’re a prospective homebuyer or you’ve been asked to co-sign, here’s everything you need to know about the risks, alternatives and tools available to help you decide whether co-signing is the right move. 

What’s co-signing?

Co-signing is when someone agrees to take on full legal responsibility for a loan alongside the primary borrower. That means the co-signer and the primary borrower are equally responsible for repaying the loan.

In some cases, co-signers are also listed on the property title, which gives them an ownership interest in the home. However, a co-signer doesn’t automatically have to be on title, and ownership arrangements can vary depending on how the mortgage is structured and the lender’s requirements.

How are co-borrowers and guarantors different from co-signers?

A co-borrower applies for the loan alongside the primary borrower and shares responsibility for repaying the loan. In many cases, co-borrowers are also listed together on the property title and have a shared ownership interest in the home. This is a common arrangement for partners or family members purchasing a property together.

A co-signer also agrees to be responsible for the loan debt if the primary borrower can’t make payments, but they may not have an ownership interest in the property. Parents often act as co-signers to help adult children qualify for a mortgage.

A guarantor supports the mortgage application by agreeing to take responsibility for the debt if the borrower defaults. Like a co-signer, a guarantor helps reduce the lender's risk by providing additional financial backing for the loan.

Unlike a co-borrower, however, a guarantor is generally not listed on the property title and doesn’t have ownership rights. Guarantors are often used when a borrower meets some, but not all, lending requirements.

Why do lenders ask for a co-signer?

Lenders often request a co-signer when the primary borrower doesn't meet the underwriting requirements.

When assessing a mortgage application, lenders look at factors such as your gross debt service (GDS) ratio, which compares monthly housing costs to gross income, and your total debt service (TDS) ratio, which includes housing costs and other debts like credit cards, car loans and lines of credit. If these ratios are too high, you may not qualify for a loan under the lender’s guidelines.

Lenders also consider factors such as credit history and credit score. So, if you have limited credit experience or a lower credit score, you may be required to co-sign.

A co-signer can help reduce the lender’s risk because they are also legally responsible for repaying the loan. The lender will typically consider the co-signer’s income, debt obligations and credit profile alongside those of the borrower when determining whether the mortgage can be approved and how much can be borrowed.

What should buyers consider before using a co-signer?

Before using a co-signer, there are a few considerations you should explore.

What are the most common reasons for needing a co-signer?

There are several reasons someone might need a co-signer for a loan or mortgage, including:

• Limited credit history / poor credit score: If you have limited credit experience or a credit score below 670, a co-signer can help you meet the lender’s requirements.
• Low income: If your income isn’t high enough to cover the lender’s requirements, a co-signer with a higher income can be factored in.
• High debt: If you’re carrying high levels of debt, adding a co-signer can help lower the combined TDS ratio and bring it within the lending guidelines.
• Better interest rates: Co-signing can help you secure a lower interest rate for the loan, which can help you save money over the long term.
• Better loan terms: Co-signing can help you get more favourable loan terms, such as longer repayment periods or lower monthly payments.
  

What are some alternatives to using a co-signer?

A co-signer isn’t always the only path to mortgage approval. In some cases, a few proactive steps can improve your financial profile and help you qualify independently, reducing both the financial risk and complexity that comes with a co-signed mortgage.

Here are alternatives to consider before co-signing:

First-time buyer tool kit: How the FHSA and HBP change the co-signer conversation

Before asking someone to co-sign, it’s worth exploring ways to strengthen your own mortgage application. Building a larger down payment can reduce what you need to borrow, improve your affordability and potentially help you qualify on your own. That’s where the First-Home Savings Account (FHSA) and Home Buyers’ Plan (HBP) can help.

FHSA basics

The FHSA is a registered investment account that helps first-time homebuyers save for a down payment on their first home. In the year you open your first FHSA, you can contribute up to $8,000, with a lifetime maximum of $40,000. Contributions are tax-deductible, helping you lower your annual tax bill and direct more money toward your home savings.

Plus, investment growth and withdrawals used for a qualifying home purchase are tax-free. Unused contribution room (up to $8,000 per year) can be carried forward, helping you catch up on missed contributions.

You can open an FHSA if you’re the age of majority in your province or territory, but no older than 71, and can keep the account open for up to 15 years or until December 31 of the year you turn 71, whichever comes first.

HBP basics

The HBP allows you to withdraw up to $60,000 from your Registered Retirement Savings Plan (RRSP) to help finance the purchase of a qualifying first home. Withdrawals made under the HBP are tax-free as long as they’re used toward a qualifying first home purchase.

The amount withdrawn must be repaid to your RRSP within 15 years, starting the second year after the year you made your first withdrawal, with annual minimum repayment requirements to avoid tax implications. It’s important to note that the repayment grace period for withdrawals made between January 1, 2022 and December 31, 2028 is extended from two years to five years.

For many first-time buyers, the greatest benefit comes from using both programs together. A larger down payment can reduce the size of the mortgage you need, potentially improve your TDS ratios and make it easier to qualify for financing without a co-signer.

What should you consider before saying yes to co-signing?

Here are three important considerations before co-signing someone else’s mortgage or loan:

• Impact on your credit: Co-signing will typically result in a hard credit inquiry, which may temporarily lower your credit score. The loan will also appear on your credit report, potentially affecting your ability to borrow in the future. While regular payments made on time by the primary borrower can have a positive impact on your credit history, missed or late payments can negatively affect your score and financial standing.
• Legal obligations: Co-signers are legally responsible for the full loan amount if the primary borrower is unable to make payments, meaning lenders can pursue you and your assets for repayment even if you never benefited from the loan yourself.
• Ownership considerations: In some cases, co-signing comes with ownership rights to the property, which can be a significant financial commitment. However, if you don’t have ownership rights, that means you can’t take possession of the home even if the borrower stops making payments.

How can you protect both relationships and finances if co-signing?

While it’s natural to want to help a loved one, there are some steps you can take to protect yourself and your relationship:

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