- Being a co-signer on a mortgage and being on title are two separate questions, and the lender's documents and the transfer documents answer them.
- If a co-signer is a foreign national and goes on title together with a Canadian citizen or permanent resident, only the foreign national's share is taxed under BC's additional property transfer tax.
- A co-signer's way out usually depends on the lender's consent, so ask about it before you sign.
A parent or friend who agrees to co-sign can be what makes a mortgage approval possible. But the word "co-signer" is used loosely, and what it means for you and for them depends on the paperwork.
This article explains the points that matter most in British Columbia: how title works, where tax and filing rules can reach a co-signer, what the risks are, and what exit options usually look like.
This article covers the law of British Columbia.
What "co-signer" can mean
People use "co-signer" for different roles. A co-signer may be a full co-borrower on the mortgage, or a guarantor who promises to pay if the buyer does not. Lenders use their own terms and forms, so read exactly what you are signing and ask the lender to explain the role in writing.
The key point is that the mortgage and the title are separate. A person can be responsible for the loan without being an owner, and a person can be an owner without being on the loan. Which setup applies is something to decide deliberately, with a lawyer, before the purchase completes.
Title: should the co-signer be on it?
If a co-signer goes on title, they become a registered owner. For property transfer tax, a registered owner is treated as the legal and beneficial owner even if they hold the land in trust for someone else. So an informal understanding that the co-signer is "only helping" does not change how the tax is calculated.
A co-signer who is a foreign national, or a buyer who is, needs extra care. BC's additional property transfer tax is 20% of the fair market value of the buyer's proportionate share of the residential portion of a property in a specified area, and it applies to foreign nationals. When title is shared with a Canadian citizen or permanent resident, only the foreign buyer's share is taxed.
Federal law also bars a non-Canadian from purchasing residential property, directly or indirectly. There are exceptions, and they come with conditions, so a non-Canadian co-signer should get advice before agreeing to anything that puts them on title.
- Some transfers that are exempt from ordinary property transfer tax, such as a transfer to a surviving joint tenant, still attract the additional tax when a foreign entity or taxable trustee receives the property.
- A person applying to register a transfer of fee simple must file a transparency declaration under the Land Owner Transparency Act, unless the land is treaty land, self-governing First Nation land or reserve land, where a Declaration of Exclusion is filed instead.
Liability and risks for the co-signer
How a co-signer's responsibility for the debt works depends on the lender's terms and your situation, so it is worth confirming with a lawyer before you sign. What co-signing could mean for your own finances and your rights to the property also depends on your circumstances, so it is a good idea to get advice on this too. The lender's documents set out many of the terms, which is why you should read them carefully before signing.
Exit options
There is rarely a quick way out. Whether a co-signer can step away depends on the lender's terms and your situation, so it is worth confirming with a lawyer. The common routes depend on what the lender and the owners agree to:
- Refinancing the mortgage so the buyer qualifies alone and the co-signer is released.
- Selling the home and paying out the mortgage.
- Asking the lender to remove the co-signer, which depends on the lender's consent.
- If the co-signer is on title, a transfer of their interest, which has its own tax and filing consequences.
It is wise to agree in writing, before closing, how and when the co-signer expects to come off the loan, and what happens if the buyer cannot refinance.
What to do next
- Ask the lender what role the co-signer has and get it in writing.
- Decide whether the co-signer will be on title, and why.
- Confirm immigration status of everyone going on title, because of the tax and federal rules above.
- Put the co-signer's exit plan in a written agreement.
- Have a lawyer review the mortgage, the transfer and the agreement between you before you sign.
Frequently asked questions
Does a co-signer have to be on title?
Not necessarily. Whether the co-signer is an owner depends on how the purchase is set up and what the lender requires. A lawyer can explain the consequences of each option.
If the co-signer is a foreign national, is the whole property taxed at 20%?
The additional tax is based on the buyer's proportionate share of the interest registered on title. When title is shared with a Canadian citizen or permanent resident, only the foreign buyer's share is taxed.
Can a co-signer simply be removed later?
Ask about this before you sign, not after.
Is a transparency declaration required when a co-signer goes on title?
A transferee applying to register a transfer of fee simple must file a transparency declaration, except where the land is treaty land, self-governing First Nation land or reserve land, in which case the applicant submits a Declaration of Exclusion from the Land Owner Transparency Act with the application. A transparency report is required only if the future registered owner is a reporting body, such as a corporation or a trustee of a relevant trust.
Sources
- Justice Laws – Prohibition on the Purchase of Residential Property by Non-Canadians Act — Justice Laws (federal)
- Province of BC – Additional property transfer tax for foreign entities and taxable trustees — www2.gov.bc.ca
- BC Laws – Property Transfer Tax Act — bclaws.gov.bc.ca
- LTSA – Learn about LOTR — ltsa.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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