Co-Signor Versus Guarantor – What is the Difference? And are There Other Options?

There are many times when an applicant can’t quite get the approval or property that they are gunning for. That’s when we reach that tipping point when the addition of a non-occupying applicant is required to push the application over the finish line for approval.  That applicant is often a parent or close family member and is referred to as either a Co-signer, or Guarantor. What we can tell you is that a guarantor is not common and not recognized by many lenders. While both roles involve assisting someone in securing a mortgage, they carry distinct responsibilities and implications. The difference between the two is as follows:

GUARANTOR: A non-occupying applicant that is added to the mortgage without being registered onto the land title. This often can only be on conventional mortgage files.

CO-SIGNER: A non-occupying applicant is added to a mortgage and to the land title.

As we mentioned, not all lenders allow for Guarantors, or applicants that request the guarantor situation, may not fulfill the eligibility criteria of the bank. Some individuals want to be a guarantor so that they simply do not ‘take’ any ownership of the original buyer’s property. The cost to that is that their name is on the debt, and they are on the hook for the liability however, they don’t have any recourse for the asset if it was ever needed.

So, what if this applicant does not meet the eligibility criteria to be a Guarantor but still prefers this option?  There is an alternative, and this is what we call Joint Tenant and Tenants in Common when speaking about different options for land title registration.

Rather than being withheld from the land title as one would expect with a guarantor status, the co-signer would continue to register on the land title, but they would exercise their right to minimize their ownership by registering as Tenants in Common. 

This is a simple request made at a law firm. The lenders may default to registering in a more traditional method which is called ‘Joint Tenants’ which is the alternative option.

JOINT TENANTS REGISTRATION: When all title holders are entitled to an even split in property rights and right of survivorship.  In the event a tenant dies, their share of the property automatically transfers to the surviving tenant.

TENANTS IN COMMON REGISTRATION: This allows title holders to allocate specific shares of ownership.  Also, in the event a tenant in common dies, they are able to pass on their property share as per their will instructions (otherwise, they would be subject to the rules that apply to property owners who die without having a will). For example, a co-signor who may have preferred a guarantor role, may only choose to register 1%, allowing the other applicant registration of 99%. There are many reasons why one may choose to register as tenants in common. However, this is simply an alternative of the guarantor vs. co-signor.

It is always important to talk to your account and lawyer when looking to be a co-signer or guarantor.