Parent Acting as Guarantor for their Children’s Mortgage Loan

In a previous blog, I discussed parents going on title with adult children for the purpose of qualifying for mortgage financing.  Another route is for the parents not to go on title, but to act as guarantors on the mortgage loan. In both situations, it is important for the parents to know that their liability under their children’s mortgage loan is 100%.  That means, if the borrowers default on the terms of their mortgage, the lender can claim against the parents directly, without having to exhaust their remedies against the borrowers or the property itself.  In some cases, pursuing the parents directly can be easier for a lender, where the parents have other more readily available and significant assets that can be seized in order to realize a court award. From a lawyer’s perspective, it is imperative that a parent going on title or acting as guarantor for their children’s mortgage loan understand this liability, and have the opportunity to seek independent legal advice or representation before proceeding.