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

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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.

So, let's talk about the new CRA T3 filing requirements for people who have co-signed on a mortgage. You might be wondering why this is even a thing, and what it means for you. Well, don't worry, because I'm here to break it down for you. First things first, let's quickly go over what a co-signer is. When you co-sign a mortgage, it means that you are essentially taking on the responsibility of the loan along with the primary borrower. This can happen when someone, like a family member or a close friend, doesn't meet the lender's criteria on their own. So, as a co-signer, you're on the hook for the mortgage if the primary borrower defaults on the loan. Second, a Bare Trust is a situation where you legally or are named as a legal owner of an asset or property, but the asset is held for the benefit of someone else. Having co-signed for someone else’s mortgage so they can qualify and get into the housing market is an example of a Bare Trust. Usually when co-signing for a mortgage, you will be added to title for as little as 1 percent of ownership; therefore, you are a named legal owner of the property. Now, let's get into the nitty-gritty of the new CRA T3 filing requirements. The Canada Revenue Agency (CRA) has recently implemented changes to ensure that all income from joint investments, including co-signed mortgages, are properly reported. In the past, co-signers did not have any reporting obligations when it came to these investments. However, with the new requirements, co-signers are now required to report any income earned from the co-signed mortgage on their T3 tax form. So, what does this mean for you as a co-signer? Well, it means that you need to pay close attention to the income earned from the co-signed mortgage. This includes any interest, dividends, or other types of income that may be generated. You will need to gather all the necessary information related to this income and report it on your T3 tax form. It should also be noted that even if there is no income generated by the property, you will still need to file a Schedule 15 (Beneficial Ownership Information of a Trust) which forms part of a T3 tax form; therefore, a co-signer of any property will now need to have a T3 filed. Now, you might be thinking, "How do I even know what income is earned from the co-signed mortgage?" The first step is to communicate with the primary borrower and the financial institution where the mortgage is held. They should be able to provide you with the necessary information, such as annual statements and tax documents. Once you have all the required information, you will need to complete the T3 tax form. This form is specifically designed for reporting income earned from joint investments, including co-signed mortgages. It will ask for details such as the type of income, the amount earned, and any taxes withheld. Make sure to fill out the form accurately and double-check all the information before submitting it to the CRA. The T3 tax form can be a bit complicated for someone that has never completed one and even though the CRA provides detailed instructions and guides on their website, it is highly recommended to seek the advice of a tax professional who can guide you through the requirements and ensure that everything is filed correctly. The deadline for the filing of the T3 is April 2nd; which is well ahead of the April 30th tax return filing deadline. There may be significant penalties levied for late or unfiled T3 tax forms. The CRA may waive penalties for the 2023 tax year; however, if it is shown that the T3 was not filed knowingly or due to gross negligence an even more severe penalty will apply. It's important to note that these new filing requirements are not limited to just the current tax year. Co-signers are required to report income from co-signed mortgages for each tax year moving forward. So, it's crucial to stay on top of your reporting obligations every year. To avoid these complications, it's essential to understand and fulfill your obligations as a co-signer. Take the time to educate yourself on the new filing requirements, gather all the necessary information, and ensure that you accurately report the income earned from the co-signed mortgage on your T3 tax form. In summary, the new CRA T3 filing requirements now require co-signers on mortgages to file a T3 tax form and report any income earned or generated by the property; even if there was no income earned whatsoever. This means that as a co-signer, you must gather all the relevant information, accurately complete the T3 tax form, and submit it to the CRA. Failure to comply with these requirements can lead to penalties and potential audits. So, make sure to stay informed and fulfill your reporting obligations to avoid any unwanted complications.