Credello: What to Consider Before Adding or Becoming a Mortgage Co-Signer in 2023

Credello: With interest rates soaring, many potential homeowners are finding mortgages are becoming increasingly hard to get. Now, even those with okay credit are finding their scores aren't good enough to get the most competitive rates. It's why some are considering adding a co-signer to guarantee their loans, but is this a good idea? And what should you consider before becoming a co-signer for someone else? Here's what you need to know.

What does a co-signer do?

A co-signer is another person who guarantees a loan. If the borrower can't make their payments, the co-signer is responsible for covering the shortfall. This means their credit score takes a hit, and they may have to repay the loan even if the borrower defaults.

A co-signer isn't the same as a co-borrower. There are a few distinguishing differences between a co-borrower vs. co-signer, but essentially co-borrowers are someone who takes on responsibility for the mortgage with you (such as a spouse, housemate, or partner). In contrast, a co-signer only becomes responsible should the primary loan holder get behind on payments.

Why add a co-signer?

Someone might want to add a co-signer to their mortgage application for a few reasons. First, some people simply can't get approved for a loan without one. Second, some people don't have good enough credit to get competitive rates on their own. And finally, some people feel they need someone else to hold them accountable for making their payments.

But is adding a co-signer worth it?

There are pros and cons to having a co-signer on your mortgage. First, having a co-signer means you have someone to rely on if things go wrong. This can give you some peace of mind, especially if you're struggling financially. 

Also, having a co-signer can help your credit score. By guaranteeing the loan, you show lenders that you're financially responsible and have a good track record. This can improve your chances of getting a better loan in the future.

But there are also cons to adding a co-signer to your mortgage application. Namely, you now have someone else to be accountable to so that their finances aren't damaged by your actions. For the most part, co-signers rarely need to get involved because the primary loan holder will stay up to date with payments. But if you start missing payments, the lender will look to the co-signer to get the loan back in good standing. In dire situations, the bank could require the co-signer to pay the remaining balance immediately, potentially ruining their finances. It's a big responsibility that both you and your potential co-signer should take time to think about, as it could damage both your and their finances, as well as your relationship.

Should I be a co-signer for someone's mortgage?

If you're considering becoming a co-signer for someone else, you must think seriously about how responsible you feel the primary loan holder is with their finances. For all co-signers, the one universal change is that you'll have an additional hard inquiry added to your credit report, so you may see a slight dip in your score. 

For most co-signers, this is the only effect they'll see for doing such a noble thing for a loved one. However, on the rare occasion that the primary loan holder begins to default or miss payments, the lenders will quickly turn to you and expect you to get the loan back to good standing. In some cases, that could mean paying off the balance of the mortgage immediately, so have a lawyer or financial advisor look over the terms before you sign so you know what happens in the worst-case scenario.

The bottom line

Adding a co-signer to your mortgage application is a big decision, and weighing the pros and cons carefully before deciding is essential. While it could help get you a better interest rate in 2023, it puts a lot of responsibility on the co-signer should you fall behind on payments, so take time to sit down with your potential co-signer to ensure everyone is aware of the risk.

About Credello

Credello is a financial tech company offering a personal finance tool that simplifies financial decisions through personalized, on-demand recommendations — so users can borrow, save, or invest with confidence. Credello believes that finding the right financial product should be as easy and interactive as online shopping, and we are on a mission to make that possible. For more information, please visit

Source: Credello

About Credello

Credello is a mobile-first platform that simplifies financial decisions by providing users with personalized, on-demand recommendations—so they can choose the best solution with confidence.

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