Related Terms: Cosigned Loan, Cosigned Mortgage, Co-signer
This person’s income, assets and credit worthiness are taken into account to help qualify you for a mortgage, and they are liable to repay the loan as well. A co-signer
, however, has no ownership interest in the house.
Having a co-signer comes with benefits and risks. Having someone with a substantial credit history co-sign on the home loan can help you get a mortgage with the best interest rates. It also benefits the person co-signing, as regular monthly payments reflects well on their credit report.
The downside of co-signing a loan comes with the risk of defaulting. If you cannot afford to make monthly payments, your co-signer is liable to repay the loan. This causes financial stress because it costs the co-signer money, and also strains your relationship.
Being or having a co-signer is not a step that should be taken lightly. Both should go into the agreement with clear expectations, and have a strategy in mind to protect themselves from defaulting on the loan.