What You Need To Know About Co-Signing A Mortgage

Tim Lyon • May 16, 2024

So you’re thinking about co-signing on a mortgage? Great, let’s talk about what that looks like. Although it’s nice to be in a position to help someone qualify for a mortgage, it’s not a decision that you should make lightly. Co-signing a mortgage could have a significant impact on your financial future. Here are some things to consider.


You’re fully responsible for the mortgage.


Regardless if you’re the principal borrower, co-borrower, or co-signor, if your name is on the mortgage, you are 100% responsible for the debt of the mortgage. Although the term co-signor makes it sound like you’re somehow removed from the actual mortgage, you have all the same legal obligations as everyone else on the mortgage. When you co-sign for a mortgage, you guarantee that the mortgage payments will be made, even if you aren’t the one making them.


So, if the primary applicant cannot make the payments for whatever reason, you’ll be expected to make them on their behalf. If payments aren’t made, and the mortgage goes into default, the lender will take legal action. This could negatively impact your credit score. So it’s an excellent idea to make sure you trust the primary applicant or have a way to monitor that payments are, in fact, being made so that you don’t end up in a bad financial situation.

 

You’re on the mortgage until they can qualify to remove you.


Once the initial mortgage term has been completed, you won’t be automatically removed from the mortgage. The primary applicant will have to make a new application in their own name and qualify for the mortgage on their own merit. If they don’t qualify, you’ll be kept on the mortgage for the next term.


So before co-signing, it’s a good idea to discuss how long you can expect your name will be on the mortgage. Having a clear and open conversation with the primary applicant and your independent mortgage professional will help outline expectations.


Co-signing a mortgage impacts your debt service ratio.


When you co-sign for a mortgage, all of the debt of the co-signed mortgage is counted in your debt service ratios. This means that if you’re looking to qualify for another mortgage in the future, you’ll have to include the payments of the co-signed mortgage in those calculations, even though you aren’t the one making the payments directly.


As this could significantly impact the amount you could borrow in the future, before you co-sign a mortgage, you’ll want to assess your financial future and decide if co-signing makes sense.


Co-signing a mortgage means helping someone get ahead.


While there are certainly things to consider when agreeing to co-sign on a mortgage application, chances are, by being a co-signor, you'll be helping someone you care for get ahead in life. The key to co-signing well is to outline expectations and over-communicate through the mortgage process.


If you have any questions about co-signing on a mortgage or about the mortgage application process in general, please connect anytime. It would be a pleasure to work with you.


Tim Lyon

Mortgage Consultant

Everything You Need to Know About Second Mortgages

By Tim Lyon • October 2, 2025
What Is a Second Mortgage, Really? (It’s Not What Most People Think) If you’ve heard the term “second mortgage” and assumed it refers to the next mortgage you take out after your first one ends, you’re not alone. It’s a common misconception—but the reality is a bit different. A second mortgage isn’t about the order of mortgages over time. It’s actually about the number of loans secured against a single property —at the same time. So, What Exactly Is a Second Mortgage? When you first buy a home, your mortgage is registered on the property in first position . This simply means your lender has the primary legal claim to your property if you ever sell it or default. A second mortgage is another loan that’s added on top of your existing mortgage. It’s registered in second position , meaning the lender only gets paid out after the first mortgage is settled. If you sell your home, any proceeds go toward paying off the first mortgage first, then the second one, and any remaining equity is yours. It’s important to note: You still keep your original mortgage and keep making payments on it —the second mortgage is an entirely separate agreement layered on top. Why Would Anyone Take Out a Second Mortgage? There are a few good reasons homeowners choose this route: You want to tap into your home equity without refinancing your existing mortgage. Your current mortgage has great terms (like a low interest rate), and breaking it would trigger hefty penalties. You need access to funds quickly , and a second mortgage is faster and more flexible than refinancing. One common use? Debt consolidation . If you’re juggling high-interest credit card or personal loan debt, a second mortgage can help reduce your overall interest costs and improve monthly cash flow. Is a Second Mortgage Right for You? A second mortgage can be a smart solution in the right situation—but it’s not always the best move. It depends on your current mortgage terms, your equity, and your financial goals. If you’re curious about how a second mortgage could work for your situation—or if you’re considering your options to improve cash flow or access equity—let’s talk. I’d be happy to walk you through it and help you explore the right path forward. Reach out anytime—we’ll figure it out together.

How Mortgage Rates Work: Fixed vs. Variable

By Tim Lyon • September 26, 2025
What affects mortgage rates? Does the Bank of Canada rate affect fixed-rate mortgages? These are questions that come up all the time, so in this this post, I’ll explain how fixed and variable rates are determined, why they don’t always move together, and what that means for you as a borrower. But to start with the short answer: While Bank of Canada announcements immediately impact variable rates, fixed rates usually have those expectations already baked in long before the announcement. That’s because fixed rates are forward-looking — they reflect where markets think rates are headed, not just where they are today. What Are Fixed and Variable Rates? Fixed Rate The interest rate stays the same for the entire mortgage term. Payments remain consistent, no matter what happens in the market. Variable Rate The interest rate changes during the mortgage term, moving up or down depending on the lender’s prime rate. Payments may stay the same (VRM) or change (ARM). How Do Fixed Rates Work? When you choose a fixed rate, the lender is guaranteeing your rate for the length of your term . To do this, they need to estimate what a fair rate will be over that time. This makes fixed rates more forward-looking — they often reflect not just today’s conditions, but also what the market expects to happen in the future. Key Points About Fixed Rates Strongly influenced by the Canadian bond market (especially the 5-year government bond yield). Lenders adjust their fixed rates based on investor expectations for inflation and future interest rates. Often, Bank of Canada moves are already baked into fixed rates before they happen. Example If bond yields suggest that rates will rise in the next year, lenders may increase fixed rates now, even if the Bank of Canada hasn’t made a move yet. How Do Variable Rates Work? Variable rates move directly with the Bank of Canada’s overnight rate. When the Bank of Canada raises or lowers its rate, lenders adjust their prime rate accordingly, and variable mortgages follow. For borrowers, the most important detail is the discount from prime , because that sets the actual rate you pay. For example, if prime is 4.95% and your mortgage is Prime – 0.5%, your rate is 4.45%. The discounts lenders offer change over time. In periods of economic uncertainty, lenders usually shrink the discount they offer, which can make new variable mortgages less attractive even if prime is coming down. Key Points About Variable Rates Directly tied to the Bank of Canada’s overnight rate, which is reviewed eight times a year. Banks adjust their prime rate in response to these moves. Your actual rate = Prime – discount (e.g., Prime – 0.5%). Example If prime is 4.95% and your mortgage is Prime – 0.5%, your rate is 4.45%. If the Bank of Canada cuts rates by 0.25%, prime drops to 4.70%, and your rate automatically drops to 4.20%. Why Don’t Fixed and Variable Always Move Together? Fixed rates reflect the bond market, which looks ahead at where rates and inflation may go. Variable rates respond directly to Bank of Canada decisions, reflecting current conditions. This is why fixed rates can fall while variable rates stay flat, or vice versa. Next Steps If you’re deciding between fixed and variable, understanding how each is set is the first step. The next is to match the right mortgage type to your budget and comfort with risk. If you’d like to review which option works best for you, I’d be happy to help. Need help with your mortgage? Book a consultation or call 778-988-8409 . Mortgage Term Glossary Amortization: The total length of time it will take to pay off your mortgage completely (typically 25–30 years in Canada). Bond Yield: The return investors get from government bonds. Used as a benchmark for fixed mortgage rates. Discount (Variable Rate): The amount subtracted from prime to determine your actual mortgage rate. Fixed Rate: An interest rate that stays the same for the entire mortgage term. Mortgage Term: The length of your mortgage contract with your lender (typically 1–5 years), after which you need to renew. Overnight Rate: The interest rate at which major banks borrow and lend money to each other, set by the Bank of Canada. Prime Rate: The interest rate banks use as a baseline for loans, influenced by the Bank of Canada’s overnight rate. Variable Rate: An interest rate that changes during your mortgage term based on lender prime rates.