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In shifting market conditions, it is not uncommon for lenders to make it more challenging for borrowers to qualify for a mortgage. One way for borrowers to overcome such qualification hurdles is to find a creditworthy individual to sign as a guarantor on their mortgage application. This individual steps in and “guarantees” the loan on behalf of the borrowers. Although the guarantor is typically not an owner of the property receiving the mortgage, their signature can allow lenders to feel more comfortable providing funds to close a transaction.

Whether the lender requires it or not, it is important for the person acting as a guarantor to obtain independent legal advice (“ILA”) prior to the execution of all mortgage documentation. This is because, as a guarantor, one is agreeing to be responsible for paying off the mortgage if the borrower defaults on the loan.

Although in the perfect scenario, a guarantor will not need to provide anything other than their signature, it is still vital for a guarantor to fully understand the terms and conditions of the transaction. Such terms may include any potential risks and liabilities that may have been overlooked when agreeing to guarantee the mortgage. A lawyer providing ILA can explain the legal implications of the documents being signed and advise the guarantor on their rights and obligations of the mortgage. This can help protect the guarantors’ interests and ensure that they are entering into the transaction with full knowledge and understanding of the loan agreement.

Obtaining ILA can provide both borrowers and guarantors with peace of mind and help to ensure that the transaction is completed efficiently. When provided with ILA the guarantor can navigate the legal process of their agreement with confidence and make informed decisions about their role in the transaction.

Of additional importance, it is essential for the guarantor to obtain ILA from a lawyer who is not representing the borrowers or the lender of the same transaction. Using a lawyer who represents the guarantor independently ensures that the primary duty is to the guarantor and that advice being provided is not influenced by the interests of any other party.

If you have any legal questions regarding Independent Legal Advice, or you would like to have one of our lawyers provide you with Independent Legal Advice, please do not hesitate to contact us at (905) 270-6660 or e-mail us at: Info@kormans.ca.

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Daniel Kuchuk is an Associate Lawyer at Kormans LLP. You can reach Daniel here: dkuchuk@kormans.ca. The information and comments herein are for the general information of the reader and are not intended as advice or opinion to be relied upon in relation to any particular circumstances. For particular application of the law to specific situations, the reader should seek professional advice. Kormans LLP cannot be responsible for the content of other sites. We expressly disclaim all liability with respect to actions taken or actions not taken based on content received from a third party website linked, directly or indirectly, to that of Kormans LLP.  The link to another site is not to be construed in any way as an endorsement of the host, the site or the information contained therein, nor is such link to be inferred as an association or affiliation with the host.