Co‑signing a mortgage can feel like a generous way to help a family member or friend become a homeowner, especially in markets like Oshawa, Ontario, where rising prices and strict qualification rules make it harder to qualify on your own.
But co‑signing comes with serious long‑term risks, and many Canadians don’t fully understand them until it’s too late.
Recently, I spoke with a homeowner in Oshawa who used a co‑signer to qualify for their mortgage a few years ago. Their mortgage is now up for renewal, and the co‑signer wants off the mortgage so they can purchase their own home without the co-signed mortgage working against their qualifying. Unfortunately, the property cannot be refinanced, and the primary borrowers still struggle to meet the qualifying ratios on their own.
This is a situation I see more often than people realize.
Below, we’ll break down why this happens, the risks co‑signers face, and what borrowers should consider before asking someone to co‑sign.
What Does It Mean to Co‑Sign a Mortgage?
When you co‑sign a mortgage in Canada, you become equally responsible for the debt. You are not a “backup” borrower, you are a full borrower in the eyes of the lender.
A co‑signer is typically added when:
The main borrower doesn’t meet income requirements
Debt‑to‑income ratios are too high
Credit history is limited or weak
The lender wants additional security
This is common in cities like Oshawa, where home prices have grown faster than incomes.
The Real Risks of Co‑Signing a Mortgage
1. You Are 100% Liable for the Mortgage
If the primary borrower misses payments, the lender will pursue you with the same urgency. Late payments, arrears, or defaults all appear on the co‑signer’s credit report.
This can impact:
Your credit score
Your ability to borrow for your own home
Your ability to qualify for car loans, lines of credit, or refinancing
Many co‑signers don’t realize they are taking on full financial responsibility, not partial.
2. You Can’t Simply “Remove” a Co‑Signer Later
This is the biggest misconception.
A co‑signer can only be removed if:
The mortgage is refinanced and
The primary borrower qualifies on their own under current stress‑test rules
In the Oshawa case I mentioned, the borrowers:
Could not refinance due to market conditions
Did not meet today’s stricter qualifying ratios
Could not remove the co‑signer at renewal
This left the co‑signer stuck on the mortgage indefinitely.
3. Renewals Do NOT Automatically Remove Co‑Signers
Many people assume that at renewal, the lender will “re‑evaluate” and remove the co‑signer.
That is not how renewals work.
At renewal:
The lender typically does not re‑underwrite the file
The existing borrowers (including co‑signers) remain on the mortgage
Removal requires a full requalification, which is essentially a refinance
If the borrower’s income, debt, or credit has changed, or if interest rates are higher, qualifying alone may be impossible.
4. Co‑Signing Reduces the Co‑Signer’s Borrowing Power
Because the mortgage appears on the co‑signer’s credit report, it affects their:
Total debt service ratios
Ability to buy their own home
Ability to refinance their own mortgage
Access to credit products
Even if the co‑signer never makes a payment, the debt counts against them.
5. If the Property Value Drops, Refinancing Becomes Harder
In markets like Oshawa, where values are fluctuating more, refinancing may not be possible if:
The loan‑to‑value ratio is too high
The borrower has insufficient equity
The lender’s appraisal comes in low
This traps both the borrower and the co‑signer in the existing mortgage.
6. Relationship Strain Is Common
Money and family don’t always mix well.
Co‑signing can lead to:
Stress
Resentment
Pressure
Misunderstandings
Long‑term financial entanglement
When a co‑signer wants out — and can’t get out — relationships often suffer.
Why This Happens More Often Today
Several factors make co‑signing riskier now than in the past:
✔ The mortgage stress test is stricter
Borrowers must qualify at the higher of:
The benchmark rate, or
Contract rate + 2%
✔ Interest rates are higher
Higher rates = harder qualification.
✔ Debt levels have increased
Car loans, credit cards, and student loans reduce borrowing power.
✔ Income hasn’t kept pace with home prices
Especially in Durham Region and throughout the GTA
✔ Refinancing rules are tighter
Lenders require stronger ratios and more documentation.
All of this makes it harder for borrowers to “take over” the mortgage later.
What Borrowers Should Consider Before Asking for a Co‑Signer
1. Can you realistically qualify on your own in the future?
If income won’t increase or debt won’t decrease, co‑signing may create long‑term issues.
2. What happens if the co‑signer wants out?
Have a plan — and a timeline.
3. Can the property be refinanced later?
Market conditions matter.
4. Are you prepared for higher rates at renewal?
Payment shock can affect qualifying ratios.
5. Is there a better alternative?
Sometimes:
A larger down payment
Paying off debt
Adding rental income
Choosing a different property …can eliminate the need for a co‑signer.
What Co‑Signers Should Consider Before Saying Yes
1. Are you willing to be financially responsible for the full mortgage?
Because you are.
2. Can you still qualify for your own borrowing needs?
This is often overlooked.
3. Are you prepared to stay on the mortgage for the full term?
Even 5 years can be a long time.
4. Do you trust the borrower’s financial habits?
Late payments affect you too.
5. Are you comfortable with the risk of being unable to exit later?
This is the most common problem.
A Real‑World Example: The Oshawa Co‑Signer Who Can’t Get Off the Mortgage
Here’s the situation I encountered:
A homeowner in Oshawa, Ontario used a co‑signer to qualify
The mortgage is now up for renewal
The co‑signer wants to be removed
The property cannot be refinanced since the appraisal came in low
The primary borrowers do not qualify under today’s ratios
The current lender cannot remove the co‑signer without qualifying the main borrowers
This is exactly how co‑signers become financially trapped.
It’s avoidable — but only with proper planning.
How to Avoid These Problems
Here are strategies borrowers and co‑signers can use:
1. Review qualifying ratios annually
Don’t wait until renewal.
2. Reduce debt aggressively
This improves TDS/GDS ratios.
3. Increase income where possible
Second jobs, bonuses, rental income, etc.
4. Build equity faster
Prepayments help.
5. Plan refinancing timelines early
Don’t assume it will be easy.
6. Work with a mortgage professional
A broker can model scenarios and timelines.
Final Thoughts: Co‑Signing Is a Serious Financial Commitment
Co‑signing can be a powerful way to help someone become a homeowner — but it comes with real risks that can last for years.
If you’re considering co‑signing, or if you’re already in a co‑signed mortgage and want to explore your options, it’s important to get clear, personalized advice.
