Leah Zlatkin featured in Calgary Herald: ‘5 things to consider before co-signing a mortgage’

Licensed mortgage broker and COO of Mortgage Outlet, Leah Zlatkin noted that parents considering co-signing on a mortgage with adult children should consider the following factors.

Your debt service ratios are affected

A co-signed mortgage is included not only in your adult child’s debt service ratios. It affects yours, too, which could affect future loan applications, including refinancing your own mortgage.

Your own existing debts affect qualification

Lenders will consider parents’ overall debt-load before approving a co-signed mortgage. Among those liabilities lenders factor are mortgages, lines of credit, auto loans and other ongoing debt.

Renewal and refinancing flexibility can be limited

If parents decide to switch lenders at renewal, or seek to refinance or apply for a line of credit, the co-signed mortgage may limit their options, Zlatkin added.

Exposure to credit risk

Any missed payments on the mortgage will affect the co-signer’s credit score along with their adult child. This might cause problems for parents applying for future loans, including facing higher interest rates than they would otherwise.

In it for the long haul

It can be hard for parents to have an exit strategy from the mortgage. Zlatkin said removing a co-signer can be difficult because the adult child often must qualify for the mortgage independently. That can take many years until they earn enough income, depending on the home’s value and the lending market conditions.