From Jurocks Facts By Email (well worth subscribing to, jurock.com) 

We published a version of this topic in 1999, 2004 and 2010. This week, we ran across exactly this situation again. A horror story of a guarantor being stuck without being able to (initially at least) get out from under.

Metro Vancouver's strong housing market and high prices means that many parents and other relatives (even friends) are being asked to back the mortgages of first-time buyers, either as a guarantor or a co-signer. They may not have the employment history or credit scores to qualify for a mortgage. The can also be asked to "help out" in the purchase of investment property.

But NOTE: There is a big difference between being a guarantor and a co-signer. A co-signer is basically a co-owner - he is registered on the title and is equally accountable for payments (although it's often a given that he will not make the payments). A guarantor, on the other hand, personally guarantees payments will be made if the original applicant defaults, but he has no claim to the property because he is not on title. NEVER just guarantee, always get maximum security!

Lenders require co-signers and guarantors for different reasons. A co-signer is used when you the buyers need income support. If the original applicant's qualifying ratio doesn't meet the lender's standards, a co-signer is required to bridge the income gap. A co-signer, because his name is also on the title, must sign all of the mortgage documents and can expect to remain on title until the applicant qualifies for the mortgage on his own. Or, in the case of two spouses, the co-signer might remain on title indefinitely. Keep in mind that removing someone from the title involves legal fees.

If you support a buyer by becoming a guarantor, consider your exit strategy. Once the buyer is in place - or if you have any doubts - it is wise to have the buyer refinance the mortgage, even if at a higher rate, through a mortgage broker who is more comfortable with debt-to-income ratios or a less than stellar credit history.

Major Point: You may also consider - when CO-SIGNING for children, to keep a property in a family trust for them for a few years until the 'age of sanity' - particularly when you put up all or most of the money! This is particularly true with daughters in this mad age where the divorce rate is ridiculous. You will keep control and if things derail, well, you still own the property.

4-BR, 3-Bath Executive Home Near VIU:  388 Camosun Drive, Nanaimo!

I just received notice yesterday that my tenant is vacating my nicest Nanaimo house this month and I have just put it back on the market for Rent-To-Own.   (388 Camosun Drive, in College Heights, Nanaimo, & overlooking the University!).

This one is only 3 minutes from VIU!   The rooms could easily be rented to students to make it cash flow!!

***The important thing is that you can lock it in now for only $20K down and no need to get a mortgage for 3 years!

Do you want a cheaper house?   358 Seventh Street, Nanaimo!

It's also close to VIU (about 7 blocks) and is cheaper than the house at 388 Camosun!

It is not very pretty and needs some fix-ups, but is much cheaper, AND.....I can be much more flexible with the terms, lower down payment, lower rent, longer term, etc!

So if you have clients who cannot afford the Camosun house, maybe we can make a deal on this one!

Check them both it out here!   www.wesellhomesbc.com     

then.....CALL CORNELL to Discuss Terms:  250-616-9053

PS:  Yes, if you bring me a buyer I will pay you a $1,000 Referral Fee!

Cheers;

Cornell

C: 250-616-9053

We Sell Homes (B.C.) Inc.