Updated: December 17, 2021

How Does Co-Signing a Mortgage Work?

A mortgage co-signer can help your approval chances in some cases. Our in-depth guide tells you how co-signing a mortgage works and if it is right for you.

Get Started
Ask Us A Question

Ask a quick question

We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects. Ask us a question and we'll get the best expert to help.

FCA Logo
1 of 3
£
£
£
2 of 3
3 of 3 Send!

No impact on your credit score

Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: December 17, 2021

A co-signed mortgage is often used to help first-time buyers get onto the property ladder. If you’re struggling to get a mortgage as an individual or couple, it can be a route worth considering.

It’s not as straightforward as taking out a mortgage in your own name but, given the right circumstances, can be the difference between approval and rejection. By following this guide, you’ll have a better understanding of how to go about this and where to look for assistance.

What is a co-signed mortgage?

A co-signed mortgage is a home loan with a guarantor or co-signer. The co-signer takes legal responsibility for repayments if the primary borrower stops paying, but doesn’t own any part of the property. Co-signing shouldn’t be confused with co-borrowing which is where all applicants are responsible for the debt and own the property together.

If you think a co-signed mortgage might be your best chance of buying a property, speak to a mortgage broker who can help you work out whether it’s the right thing for you and find the best lender if you decide it’s the way to go.

Speak to a mortgage expert today

Get Started

Who can co-sign?

Different lenders have different criteria when it comes to co-signers. Some will insist on having a close family member while others are a bit more flexible. Of course, co-signers will need to have a good credit score and show they have the means to pay the loan if required.

Most co-signers are parents with a low Debt to Income (DTI) ratio (i.e., they have minimal debt and steady income) or who agree to offer their own property or savings as security against the mortgage. In some cases, the lender will lock a portion of the co-signers savings in an account or take ownership of part of their property for the life of the co-signed mortgage, or until the borrower has generated a certain amount of equity.

It’s best to seek professional advice on the specific risks of any particular co-signed loan product before going ahead, to ensure there are no nasty surprises down the line.

Why choose a co-signed mortgage?

Co-signing is a way of helping someone (usually a family member) get onto the housing ladder when they don’t meet the eligibility criteria on their own or can’t prove affordability. It’s used to strengthen a mortgage application or ‘get it over the line’.

The major beneficiary of a co-signed mortgage is the primary borrower. They get to buy their first home, which they wouldn’t otherwise have been able to. The co-signer has the satisfaction of knowing they have helped a family member get a start in life.

Co-signed mortgagors can often get better interest rates than they could hope to be offered if applying on their own. In some cases they can buy with a reduced deposit, or even borrow 100% of the value of their new home in certain circumstances.

A co-signed mortgage may be your best bet if you are:

  •  On a low income
  •  Have little or no deposit

Some lenders will predict the primary borrower’s future ability to pay when assessing whether to agree to a co-signed mortgage. This type of loan is not intended to be permanent and most brokers will discuss possible exit strategies with the co-signer as part of the application process.

Our Broker-Matching Service Guaranteed!

We want you to have complete confidence in our service, and get the best chance of securing your mortgage. We guarantee to get your mortgage approved where others can’t – or we’ll give you £100*

Get Started
Learn More
Mortgage Approval Guarantee or £100 back

How to prepare your application

If you’re interested in this type of mortgage, there’s a few simple steps you should take right from the outset to make the process much more straightforward.

Step 1.
Step 2.
Step 3.

Prepare your documents.

  • Primary borrower(s) – Make sure you have your three most recent bank statements and wage slips. Self-employed mortgage applicants will typically need to provide two-three years’ of certified accounts although this can be less depending on the lender. You will also need proof of your current address, evidence that you have a deposit (savings statement or gifted deposit letter), and details of the proposed property if applicable.
  • Co-signer(s) – You will need to provide proof of income, details of the source of the security you will be using as guarantor, and ID and proof of address as detailed above.
    • Some lenders may require further proof. But these documents should be enough for your broker to know whether a co-signed mortgage is likely to be approved and give them an idea of which lenders might be suitable.
    • Use our mortgage application guide to check all the documents you’ll need.

Check your credit reports

All parties will have to agree to a credit check. You can download your credit reports beforehand. Checking your report now will highlight any potential problems and allow you to deal with any inaccuracies before starting your application.

Speak to an experienced mortgage broker

The next step should be to seek advice from a broker who specialises in co-signed mortgages and will be able to find the most suitable lender for you.

Our unique broker-matching service is designed to match you with a broker who has experience in helping people in your situation. Get in touch and we will arrange for an advisor we work with to contact you directly

Eligibility requirements

To qualify for a co-signed mortgage, you will need to meet the lender’s eligibility criteria and deposit requirements, which are as follows…

What can impact your application?

When someone co-signs your mortgage, they ‘loan’ you’ their good credit rating and secure financial position. But that doesn’t mean you will automatically be accepted for a mortgage just because you have a co-signer.

A poor credit rating can adversely affect your application even if the co-signer has an impeccable financial record. Or the co-signer may have a significant amount of debt that discourages the lender from approving the loan despite a perfect payment record.

Lenders will expect to see evidence that the primary borrower(s) can afford the repayments from their own income. Although some may only expect the primary borrower(s) to have capacity to afford 70% of the repayments. If this is the case, serious consideration must be given to how the loan will be repaid.

Others place a limit on the age of the co-signer at the time of signing the agreement and its intended closing date. There might also be a cap on the loan to value ratio.

Deposit requirements

Deposit requirements vary hugely. As always, the bigger your deposit, the more likely you are to be accepted for a mortgage, and the better rate you will be eligible for. As a general rule, anywhere between 10%-15% is a good starting point.

If you haven’t been able to save this amount – don’t panic! This is all about getting started and having a co-signer alongside you will help overcome a low deposit scenario, as long as you know where to find the right lenders who can cater for them.

What types of mortgages can be co-signed?

A wide variety of mortgages are available for co-signature but this option is most often used for first-time buyers. Help to Buy mortgages are eligible if you can find a willing lender.

While many high street lenders are quite rigid in terms of eligibility and lending criteria, there are plenty of more flexible options out there if you know where to look. With a broker on your side, you can approach those lenders most likely to approve your application.

Going it alone can be a bit of a stab in the dark and you run the risk of multiple rejections which can have a negative impact on your credit file.

Finding the right broker for a co-signed mortgage

Due to the complex nature of co-signed mortgages and the broad range of eligibility criteria, a broker is your best bet in finding the right one for you. They’ll find you the best deals and guide you through the paperwork no matter how complex it is.

We work with mortgage brokers who specialise in finding the best deals for co-signed mortgages from lenders up and down the country. Our broker-matching service will put you in touch with someone who has a proven track record of helping people in your situation.

Give us a call on 0808 189 0463 or make an enquiry and we will arrange for an expert to speak to you straight away for a free, no obligation, chat.

FAQs

What are the tax implications of a co-signed mortgage?

If you’re the co-signer, you can deduct any mortgage interest payments you made on your tax return. The tax obligations for the main mortgage applicant are no different than they would be for any other type of mortgage.

How do I remove a co-signer from my mortgage?

You’ll need to be eligible for the mortgage on your own to do this, but if the debt has shrunk significantly or your circumstances have changed for the better, it could be possible.

Simply contact your mortgage lender and ask them whether they will allow the co-signer to be removed from the agreement. Expect them to carry out eligibility and affordability checks on you to make sure you can afford the mortgage without their help.

Ask a quick question

We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects. Ask us a question and we'll get the best expert to help.

FCA Logo
1 of 3
£
£
£
2 of 3
3 of 3 Send!
Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Continue Reading

Chevron Right Apply for a Mortgage

Chevron Right A Complete Guide to the Mortgage Application Process

Chevron Right What are the maximum mortgage terms?

Chevron Right Can a Mortgage Cover Stamp Duty?

Chevron Right Getting an Agreement in Principle

Chevron Right Can You Get a Mortgage with a Criminal Record?

Chevron Right What Can Happen to Your Mortgage Offer with a Change of Circumstances

Chevron Right How Does Co-Signing a Mortgage Work?

Chevron Right Second-Time Buyer Mortgages

Chevron Right Mortgages for 2, 3 or 4 People

Chevron Right Getting Another Mortgage If You Already Have One

Chevron Right Foreign National Mortgages

Chevron Right Joint Mortgages With Parents & Other Family Members

Chevron Right Joint Borrower Sole Proprietor Mortgages (JBSP)

Chevron Right Joint Mortgages Guide

Chevron Right What Happens if One Person Dies On a Joint Mortgage?

Chevron Right A Guide to Rent-a-Room Mortgages

Chevron Right Bank Statements for a Mortgage

Chevron Right Getting a Mortgage in Northern Ireland

Chevron Right Mortgage Redundancy Insurance

Chevron Right Mortgage Underwriting in the UK

Chevron Right Getting a Mortgage in Wales

Chevron Right Islamic Halal Mortgages

Chevron Right A Guide To Mortgage Retentions When Buying a House

Chevron Right What To Do If Your Mortgage Offer is Withdrawn

Chevron Right Removing a Name from a Joint Mortgage

Chevron Right Getting a Mortgage in Scotland

Chevron Right How to get Accepted for a Mortgage

Chevron Right Getting a Mortgage With No Early Repayment Charges

Chevron Right Getting a Mortgage With Outstanding Debt

Chevron Right Your Credit Score

Chevron Right What to do if You Can’t Get a Mortgage

Chevron Right A Helpful Guide to Single Parent Mortgages

Chevron Right What Stops You From Getting a Mortgage?

Chevron Right What Checks Do Mortgage Lenders Do Before Completion?

Chevron Right Getting a Mortgage if You’re a Visa Holder

Chevron Right Self Certified Mortgages: Are They Still Available?

Chevron Right Getting a Mortgage if you are Disabled

Chevron Right Getting a Mortgage While Still Paying off a Loan

Chevron Right How to Get a Mortgage Quickly

Chevron Right How to Get a Sole Mortgage When Married or Living with Your Partner

Chevron Right Getting a Single Person Mortgage When Buying a House

Chevron Right Getting a First-Time Buyer Mortgage

Chevron Right Cryptocurrency Mortgages

Chevron Right A Complete Guide to Mortgages

Chevron Right Mortgage Guarantee Scheme

Chevron Right International Mortgages Explained

Chevron Right Gambling and Mortgages

Chevron Right How Debt-to-Income Ratios Affect Mortgage Applications

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

Get Started