Guide · Special situations

Buying with a parent as co-signer or guarantor

A parent can help in three ways: co-sign the loan, act as guarantor, or give the down payment. They commit very differently.

By Grégory Payotte, Founder of Payotte · Published

In short

A parent who is a co-borrower (co-signer) signs the loan with you and becomes responsible for the whole unpaid balance, as you are. A parent who is a guarantor commits to pay if you do not. For an insured mortgage, CMHC lets a guarantor count: at least one borrower or guarantor must have a score of 600. A parent can also give the down payment: CMHC accepts a non-repayable gift from immediate family. Before signing, everyone should know what they are risking.

100%
of the unpaid balance: what a co-borrower becomes responsible for
FCAC
600
the minimum score of at least one borrower or guarantor for an insured mortgage
CMHC
Gift
non-repayable, from immediate family: an accepted source of down payment
CMHC

Three ways to help, three commitments

What each role commits the parent to
Co-borrower (co-signer)GuarantorDonor
Signs the loanYesYes, a suretyship contractNo
Liable for the debtFor the whole unpaid balance, like the borrowerOnly if the borrower does not pay (unless that benefit is waived)No
Gets statementsYes: a federal lender must give them the same statements as other co-borrowersThe creditor must give them, on request, useful information on the debtNo
For CMHCBorrowerGuarantor: can provide the 600 scoreNon-repayable gift from immediate family accepted

Sources: FCAC (joint borrowers, joint credit cards); CMHC (Purchase, mortgage loan insurance FAQ); Civil Code of Québec, arts. 2333 to 2352 (suretyship).

In Quebec: suretyship

The Civil Code defines suretyship as the contract by which the surety binds themselves towards the creditor to perform the debtor’s obligation if the debtor fails to. It is not presumed: it must be express. The surety only has to pay if the debtor defaults, and has the benefit of discussion, unless expressly waived.

Watch for the word solidary: a surety who signs as a “solidary surety” or “solidary co-debtor” can no longer invoke the benefits of discussion and division. They can then be pursued for the whole amount, like a borrower. Read that clause with a notary before signing.

Being on title, or only on the loan

Signing the loan does not make the parent an owner. If they are also on title, you become undivided co-owners: your shares are presumed equal, each can mortgage their share, and the parent’s creditors can seize it. An indivision agreement can set other shares and exit rules; the undivided co-ownership guide covers them.

In Quebec, the welcome tax law provides an exemption for a transfer between parent and child in the direct line; it does not cover a joint purchase from a third party. Have the notary confirm your case.

Before signing

  1. Choose the role: down payment gift, guarantor or co-borrower. The more the parent commits, the greater their risk.
  2. Read the contract: simple or solidary guarantee, duration, what happens on default.
  3. Put in writing between you who pays what, and what happens on sale or separation.
  4. Ask the lender on what conditions the parent can be removed from the loan later.
  5. Have a notary review it all, and compare the options with a mortgage broker.

Frequently asked questions

What is the difference between a co-signer and a guarantor?

The co-borrower (co-signer) is responsible for the whole unpaid balance, like the borrower. The guarantor only pays if the borrower does not, unless they signed on a solidary basis.

Can a parent give the down payment?

Yes. CMHC accepts a non-repayable gift from immediate family members as a source of down payment.

Can a guarantor help get an insured mortgage?

Yes: for a CMHC-insured mortgage, at least one borrower or guarantor must have a minimum credit score of 600.

Does the parent become an owner of the house?

No, unless they are on title. In that case, you become undivided co-owners, with shares presumed equal.

Sources

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Updated

General information, not legal or financial advice. For your situation, consult a notary or a mortgage broker.