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A guarantor is a person who promises to repay a mortgage if the primary borrower defaults, strengthening a weak application without being added to the property’s title. Guarantors are commonly used when a borrower’s income or credit history alone doesn’t meet a lender’s requirements.
A guarantor’s income and debts are included when the lender calculates GDS and TDS for the file, and their credit is reviewed as part of the application. Unlike a co-signer, a guarantor is typically not registered on title and does not have an ownership stake in the property — their role is purely to backstop repayment.
A guarantor is legally on the hook for the full mortgage debt if the primary borrower stops paying, even though they hold no equity in the home. This arrangement is common for first-time buyers with limited credit history or lower qualifying income, where a parent or family member with stronger credit and income guarantees the loan.
Included in the ratios: a guarantor’s income and debts are factored into GDS and TDS for the application, just like the primary borrower’s.
Not on title: a guarantor typically has no ownership interest in the property, unlike a co-signer.
Full legal liability: a guarantor is responsible for the entire mortgage debt if the borrower defaults, despite holding no equity.
Common for weaker files: often used when a borrower’s credit score or qualifying income alone doesn’t meet a lender’s requirements.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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