Agreement With Co-Signer

• Co-signing a mortgage is a heavy responsibility, which should be done after careful consideration. An agreement should be drafted by a real estate lawyer to state the conditions under which the mortgage is being co-signed and how the possible eventualities of default will be dealt with. This agreement acts as a guide on whether the mortgagee can remove the co-signer from the deed. It also spells out what would happen if the mortgagee defaults. For instance, if the co-signer makes some of the monthly repayments to cure the default, will the money be refunded? Having an agreement protects the co-signer.
  
  

Co-Signer's Ownership Stake

• A co-signer has no ownership stake in the property that is bought with a mortgage loan. His role is to act as a guarantor for the loan. The co-signer therefore has no say in case of any dispute between the mortgagee and the mortgage lender. The only discussion he can be involved in is making arrangements to repay the loan if the mortgagee defaults. Because of this, the co-signer should evaluate carefully whether paying off the loan after default is worth it or he should just let the bank foreclose.
  
  

Duties to the Co-Signer

• If you are taking a mortgage for which you will require a co-signer, you have a duty to inform the co-signer all the necessary information that he needs to make a decision whether to sign. You should inform him the mortgage period, the total amount of the mortgage and the monthly repayment amounts. This information is important because it will enable him know what he is getting into. It is particularly important for him to know about the mortgage amount because it will affect his own loan applications in future. As long as the mortgage he has co-signed remains unpaid, he will qualify for less credit.
  
  

Bank Accelerating a Mortgage

• Accelerating a mortgage refers to the right of a mortgage lender to demand payment of the outstanding loan amount, usually after the mortgagee has defaulted. The law allows banks to do this. However, the bank has discretion to decide whether to do so if you take the co-signer off the deed. If you make arrangements to continue timely repayments and the bank is satisfied with your commitment, it may not accelerate.