Being asked to co-sign a mortgage for a family member or friend is quite the ask. Whether you’re the asker or asked, there are many reasons why co-signing on a mortgage is a good idea. It has many benefits. It helps out someone lacking in their credit history, for example. There is much to understand about how co-signing on a mortgage works. If there isn’t a relationship of trust between all parties, it could cause tension and issues further down the road.

Here is an honest look at the benefits of co-signing on a mortgage.

You Reduce the Lender’s Risk

When you co-sign a loan, you reduce the lender’s risk. You tell them that you are willing to be responsible for ensuring the repayment of the loan. In a sense, you are the backup. You tack on your credit history, finances, and everything else to the person getting the loan, backing up the primary borrower.

You Can Help Your Children Buy A Home

Many co-signers are parents trying to help their children qualify for mortgages. That said, it can be for a friend or anyone. Co-signers reinforce that the loan will be repaid, even if the primary borrower cannot.

You Look After Another Person

When you co-sign a mortgage for someone, it can be an opportunity to look after them and ensure they’re paying their loans on time. If it’s family, this will tie you to them for quite some time, which can be preferred between parents and children.

You Can Help Renew a Mortgage

Co-signing a mortgage is not always done initially. In some cases, co-signing a mortgage can help someone renew their mortgage and keep them in their home. Especially with rising interest rates, this can be extremely helpful to someone in need.

You May Help Find a Better Lender

If you decide to co-sign a mortgage, some co-signers will bring the primary borrower to a better lender and help them find a better loan source. In the same way that banks offer mortgages, credit unions do as well. Many lenders exist, and finding the right mortgage partner is key.

You Help Them Access Better Mortgage Terms

So long as they have strong financials to back it up and you are confident in their ability to repay, co-signing a mortgage allows someone to access better mortgage terms. This can mean a better interest rate, repayment schedule, and improved terms and conditions.

There Is No Need For Them to Look at Alternative Lenders

If someone does not qualify for a mortgage through a bank or credit union, they may look at alternative lending sources. These tend to carry increased risks and worse terms than what is preferable. It can also put someone in a dangerous spot financially if they ever fail to make their mortgage payments.

You Could Save Someone a Lot of Money

By improving mortgage terms and preventing someone from having to resort to looking at alternative lenders if they do not qualify outright, as a co-signer, you easily end up saving someone thousands of dollars, if not tens of thousands.

You Help Out Someone with Little Credit History

If the only issue with someone obtaining a mortgage is that they have a very little credit history, but you know them to be a responsible person with the finances to pay for their mortgage over the years to come, co-signing on a mortgage allows that person to obtain their loan.

You Help Out Someone Who Is Rebuilding Their Credit

A person who has gone through bad financial times and has wrecked their credit may have that following them around for years after the fact. While it’s unfair, it may disqualify them from obtaining the type of mortgage they want. When you co-sign, you allow that person the chance to receive a mortgage.

You Help Others Get a Leg Up

No matter the reason for it or who it is, if you have good credit and a solid income, you can weaponize that and help another. If you don’t have any plans to borrow shortly and are relatively secure financially, there is no reason not to co-sign a mortgage for the right person.

You Can Craft Your Terms If You Like

If you are doing this for a family member, outside of the mortgage paperwork, you may want to discuss with them what you require of them to be a co-signer on their mortgage. This can mean an increased presence in their life, more time together, attending specific events, or access to an asset they maintain. It can be an opportunity to gently negotiate personal terms that bring you and the primary borrower closer together.