Published: January 28th, 2025 • Last Updated: January 28th, 2025
Author: Ross Taylor on AskRoss.ca

P4: What You Need To Know About Cosigning a Mortgage

If you’re co-signing for a first-time homebuyer, you might be wondering how it could impact their eligibility for government incentives.

In this final part of our four-part “What You Need To Know: Cosigning a Mortgage” series, I’ll explain the specific programs that could be affected by a co-signer’s involvement, from tax credits to land transfer rebates.

Knowing how to structure your co-signing arrangement could save a first-time home buyer thousands of dollars.

If the person you’re co-signing for is a first-time homebuyer who qualifies for certain programs, your co-signing could throw a wrench in that if you already own a home yourself.

Jump to a specific section in this article ↓↓

• First-Time Home Buyer Incentive (FTHB Not Active)
• Home Buyers’ Plan (HBP)
• First-Time Home Buyers’ Tax Credit (HBTC)
• GST/HST New Housing Rebate
• Ontario & Toronto Land Transfer Tax Rebates
• 30-Year Mortgages for First-Time Buyers of New Builds
• Advice From Ross Taylor Mortgages Re: FTHB Incentives vs Cosigning

If you missed them, make sure to check parts one through three of our co-signing series:

1. What Are The Tax Implications of Co-signing a Mortgage in Canada?
2. What Are The 7 Essential Steps To Take When Co-Signing A Mortgage For A Family Member?
3. 7 Risks & Essential Tips For Co-Signing A Loan For Someone With Poor Credit – Ross Taylor

Here are the government programs and incentives updates for Canadians and how having a co-signer will affect your eligibility for them.

First-Time Home Buyer Incentive (FTHB Not Active)

Unfortunately, the federal First-Time Home Buyer Incentive program has been discontinued as of March 2024. This shared-equity program offered 5-10% of the purchase price to put towards a down payment, but it’s no longer accepting new applications.

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Home Buyers’ Plan (HBP)

The good news is that the Home Buyers’ Plan is still active and remains one of the best tools for first-time buyers. This program allows you to withdraw up to $60,000 from your RRSP to put toward your down payment completely tax-free.

That’s nearly double the previous limit of $35,000, thanks to the 2024 federal budget!

How does having a co-signer affect my ability to qualify for the Home Buyers’ Plan (HBP)?

Adding a co-signer to your mortgage typically doesn’t affect your eligibility for the HBP, as this program is based on your individual first-time buyer status. However, there are some important considerations.

If your co-signer is on title:

• As long as you meet the first-time buyer criteria, your eligibility for the HBP remains intact, even if your co-signer is not a first-time buyer.
• Your co-signer cannot withdraw funds from their RRSP under the HBP for the same home purchase if they are not considered a first-time buyer.

If your co-signer is not on title:

• If your co-signer is acting as a guarantor and not listed on the title, their involvement will not affect your ability to participate in the HBP.

What are some solutions to maximize your use of the HBP?

If you need a co-signer support but want to fully leverage the Home Buyers’ Plan, here are some strategies to consider:

Co-signer withdrawal restrictions

• If your co-signer IS a first-time buyer and plans to contribute to the down payment, ensure they meet the HBP eligibility criteria. Both of you can withdraw from your RRSPs, potentially combining funds for a larger down payment.

Guarantor option

• If your co-signer is NOT a first-time buyer, consider having them act as a guarantor rather than a co-owner. This avoids potential complications while preserving your ability to use the HBP independently.

Proper planning can help you navigate these details while ensuring you benefit fully from the HBP. Always consult a mortgage professional or financial advisor to make the most of your resources and maintain compliance with program requirements.

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First-Time Home Buyers’ Tax Credit (HBTC)

The federal First-Time Home Buyers’ Tax Credit now offers a $10,000 non-refundable income tax credit, which equals $1,500 in tax savings.

You can claim this credit as long as you meet these two requirements:

• You (or your spouse or common-law partner) purchased a qualifying home.
• Neither you nor your spouse or common-law partner lived in another home you owned, in Canada or abroad, during the year of purchase or the previous four years—unless you have a disability.

How does having a co-signer affect my ability to qualify for the First-Time Home Buyers’ Tax Credit (HBTC)?

Your co-signer’s ownership history doesn’t impact your eligibility for the HBTC, as it’s based on your personal home ownership history.

• Having a co-signer on your mortgage (not on the title) does not affect your HBTC eligibility.
• The co-signer’s ownership history does not impact your eligibility for the HBTC.
• If the co-signer is on title as a co-owner, the tax credit can only be claimed once per home but can
  be split between the owners as long as the total doesn’t exceed $10,000.

Don’t forget, when claiming this credit

• First-Time Home Buyers’ Tax Credit (HBTC) credit must be claimed in the tax year of purchase.
• The home must become your principal residence within one year of purchase.
• If splitting the credit with a spouse or partner, the combined claims cannot exceed $10,000.

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GST/HST New Housing Rebate

Now, if you’re co-signing on a brand new or substantially renovated home, you need to be aware of some eligibility factors for the GST/HST New Housing Rebate.

This rebate lets you get back some of that GST or federal part of the HST you paid on a new home used as a primary residence.

What you need to know about qualifying for the GST/HST Housing Rebate:

• The home must be used as your primary residence to qualify for the rebate.
• This rebate applies to purchases of new construction or substantially renovated homes.
• The maximum federal rebate is $6,300 for homes valued at $350,000 or less.
• For properties priced between $350,000 and $450,000, the rebate amount decreases gradually based on the price. The higher the property price within this range, the smaller the rebate you’ll receive.
• Homes priced above $450,000+ are not eligible for the federal rebate.

Additionally, some provinces, such as Ontario, may offer a provincial portion rebate for HST.

How does having a co-signer affect my ability to qualify for the GST/HST Housing Rebate?

The impact of a co-signer on your GST/HST Housing Rebate eligibility is actually quite significant and needs careful consideration.

• If your co-signer appears on the purchase agreement (not just the mortgage), but doesn’t intend to live in the property, you could lose the entire GST/HST rebate.

• This rule is strictly enforced by CRA, and getting it wrong can result in unexpected tax bills at closing. Even having them as a bare trustee on title can affect your eligibility.

To protect your rebate eligibility, I strongly recommend:

• Having your co-signer only on the mortgage, not the purchase agreement.
• If they must be on the title, work with your real estate lawyer to properly structure the arrangement.
• Consider alternative options like a guarantor instead of a co-signer.

Let me be clear – if anyone on your purchase agreement doesn’t meet the primary residence requirement, you could lose the entire rebate.

This isn’t about previous home ownership (that doesn’t matter for this rebate) but about how the property will be used.

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Ontario & Toronto Land Transfer Tax Rebates

In Ontario, first-time buyers can get a rebate on the provincial land transfer tax of up to $4,000. For Toronto properties, an additional municipal rebate of up to $4,475 is available.

However, if your co-signer goes on the title, even as a 1% owner, it could impact your eligibility for the full rebate amount if you’re a first-time buyer.

Ontario Land Transfer Tax Rebate

• First-time homebuyers in Ontario can receive a rebate of up to $4,000 on the provincial land transfer tax.
• This rebate covers the full tax for homes valued at $368,333 or less. For homes priced above this threshold, buyers receive the maximum $4,000 rebate and pay the remaining balance of the land transfer tax.

Toronto Municipal Land Transfer Tax Rebate

• First-time homebuyers in Toronto are eligible for an additional rebate of up to $4,475 on the municipal land transfer tax.
• This rebate applies to homes valued at $400,000 or less, with buyers paying any remaining balance for higher-priced properties.

How does having a co-signer affect my ability to qualify for the Ontario & Toronto Land Transfer Tax Rebates?

Adding a co-signer to your mortgage can provide the support you need to secure financing, but it’s important to understand how their involvement—particularly if they’re added to the property title—could impact your eligibility for land transfer tax rebates.

If your co-signer is on title:

• If your co-signer is added to the title as a co-owner (even with a small ownership percentage like 1%), their homeownership history will affect your eligibility for the rebates.
• If the co-signer is not a first-time homebuyer, the rebate will be reduced proportionally based on their ownership share.
• If your co-signer is your spouse and has previously owned a home while being your spouse, you will be disqualified from receiving the rebate entirely.

If your co-signer is not on title:

• If your co-signer only signs the mortgage and does not appear on the title, their homeownership history will not impact your eligibility for the rebates.

What are some solutions to maintain my full rebate eligibility?

If you need the financial support of a co-signer but want to protect your eligibility for the full Ontario and Toronto land transfer tax rebates, here are some strategies to consider:

Guarantor option

• Have your co-signer act as a guarantor rather than being added to the title or mortgage application. This ensures their ownership history does not affect your rebate eligibility.

Bare trust agreement

• Have your lawyer create a bare trust agreement before closing
• This establishes the co-signer has no beneficial interest in the property.

Tenants in common structure

• Register ownership as tenants in common with your co-signer having minimal ownership (e.g., 1%)
• This minimizes the impact on rebate eligibility while maintaining mortgage support.

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30-Year Mortgages for First-Time Buyers of New Builds

Starting August 1, 2024, there’s a new option for first-time buyers purchasing newly constructed homes: a 30-year amortization period. This allows for lower monthly mortgage payments, making homeownership a bit more affordable in those early years.

While this won’t be available for all first-time buyer​ additions for those looking at new builds. Just remember, lower payments over a longer term mean paying more interest in the long run, so this option should fit into your broader financial plan.

What are the eligibility requirements for FTHB 30-year mortgages?

First-time homebuyer

At least one borrower must meet the first-time buyer criteria, which includes:

• Never having purchased a home before.
• Not occupying a home they or their spouse/common-law partner owned as a principal residence in the last four years.
• Recently experiencing the breakdown of a marriage or common-law partnership (similar to the Home Buyers’ Plan rules).

Newly constructed home

• The property must be newly built and not previously used for residential purposes. This includes newly constructed condominiums, even if there was an interim occupancy period.

High-ratio mortgages only

• This measure applies to high-ratio mortgages (where the loan exceeds 80% of the home price) on owner-occupied properties.

Title ownership

• If your co-signer is added to the title as a co-owner of the property, their homeownership history could also affect your eligibility for this and other first-time buyer programs. Even a small ownership percentage (e.g., 1%) could disqualify you.

How does having a co-signer can affect my eligibility for the 30-year mortgage program?

First-time buyer status

• At least one borrower on the mortgage must qualify as a first-time homebuyer. If your co-signer is listed on the mortgage and they’ve owned a home or occupied one they owned as a primary residence in the last four years, this could disqualify you from the program.

Title ownership

• If your co-signer goes on title as a co-owner of the property, their homeownership history could impact your eligibility for first-time buyer programs, including this one.

How to maintain eligibility for a 30-year mortgage?

Guarantor option

• If your co-signer acts as a guarantor rather than being added to the title or mortgage application, their first-time buyer status won’t impact your eligibility.
• This allows you to access the program without restrictions tied to their ownership history.

Bare trust agreement

• If your co-signer must be on title, work with a real estate lawyer to create a bare trust agreement. This ensures they have no beneficial interest in the property, though this arrangement may still require careful review by lenders and insurers.

Working with a mortgage professional is key to structuring the arrangement correctly while maintaining your eligibility for 30-year mortgages.

When both parties are proactive, the likelihood of legal action or asset loss drops significantly.

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Advice From Ross Taylor Mortgages Re: FTHB Incentives vs Cosigning

I hope you’ve found our four-part “What You Need To Know: Cosigning a Mortgage” series both informative and empowering.

Whether you’re considering co-signing or you’ve been asked to help someone take their first step into homeownership, it’s clear that the decision comes with its fair share of challenges and opportunities. If you’re still wrestling with questions or unsure about the next steps, I’m just a phone call or email away.

It’s not just about saying yes or no—it’s about structuring the arrangement so that everyone benefits by saving you money and ensuring there are no unintended surprises down the line.

Whether you need a second opinion, a strategy to maintain eligibility for first-time buyer incentives or just some peace of mind, my team and I are here to help.

After all, co-signing isn’t just a signature on paper—it’s a commitment. Let’s make sure it’s one you can feel good about.

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