Should You Co-sign your Child's Mortgage?

In Canada, a co-signer on a mortgage is someone who agrees to be legally responsible for the mortgage payments if the primary borrower defaults. Mortgage with a co-signer can help a borrower qualify for a loan if they have insufficient credit history or income on their own. However, it's a significant financial commitment and carries risks for the co-signer.

A bare trust agreement, on the other hand, is a legal arrangement where a trustee holds property or assets on behalf of a beneficiary. In the context of real estate, a bare trust may be used for various purposes, such as holding property for the benefit of a minor child or managing property on behalf of someone who is unable to do so themselves.

If a parent co-signs their child's mortgage and the property is held in a bare trust, it means that the parent may have legal responsibility for the mortgage payments, but the property is legally owned by the child and held in trust by the parent as trustee. This arrangement can have implications for taxation, estate planning, and asset protection.

It's essential to consult with a legal and financial advisor to understand the implications of co-signing a mortgage and entering into a bare trust agreement, as these arrangements can have complex legal and financial consequences.