Just when you thought you were home and hosed (pardon the pun) when it comes to home loans, you find out there are three different types of home loan signatories.

But what's the difference between the three and do you need one of them?

Read on to find out more.

Home loan helpers

As we recently explained, lenders understandably much prefer a 100% reliable borrower who will pay them back in full - and that's independent of any lifestyle dramas that occur along the borrower's road, including lost jobs.

So if you're concerned you're not a trustworthy borrower, consider turning to a co-signer, guarantor or co-borrower.

All of these home loans can help the many people struggling to find lenders' preferred 20% home loan deposit.

These home loans are also a great idea for first-time buyers or those with a slim or wobbly credit score, financial history and income.

Co-signer home loans

This type of loan often gets mixed up - or used interchangeably - with guarantor loans and this is understandable as these two loans are similar.

As with a guarantor home loan, a co-signer agrees to be responsible for the financial implications of a mortgage if the borrower is struggling with this issue.

A co-signer's financial strength can also help borrowers purchase a home more swiftly and potentially obtain better home loan terms and conditions including lower interest rates.

However, think of co-signers as credit score and financial boosters, rather than deposit boosters.

In other words, their initial assistance is based on their strong credit score, income and financial history, rather than increasing your loan deposit.

In other differences between guarantor and co-signer loans, the latter group can:

• be a friend or family member of the borrower 
• don't have to own a home or have a mortgage

However, in a similarity between guarantor and co-signer loans, a co-signer's responsibility to a struggling borrower may negatively impact the co-signer's mortgage and credit score, particularly if the borrower's repayments are continually late.

This could make it harder for co-signers to apply for a mortgage or other loan.

Guarantor home loans

As we've discussed in the past, guarantor home loans are highly similar to a co-signer one, including the risks involved on the guarantor's side.

However, a major difference between the two is that a guarantor will only step into the financial fray if the borrower completely defaults on the loan - as compared to a co-signer must take responsibility for every missed borrower repayment.

In other words, guarantors' and co-signers' liabilities are very different.

US retirement group financial planner, Michael Foguth, explained it to Life Hacker this way:

“The co-signer, simply by signing on to the debt, is liable for the debt without the creditor (lender) needing to take any additional actions.

"The guarantor is only liable for the debt after the creditor has exhausted all other options of collections from the original borrower.”

As well, a guarantor must:

• be a close family member (although some lenders will allow for a work colleague or friend)
• be a homeowner - as their home equity forms a part of the lender's financial security

This latter point is important as the guarantor's equity will enable a larger deposit on the borrower's behalf, and thus help them to (possibly) avoid Lender's Mortgage Insurance (LMI) - that is, if the equity covers 20% or more of the guarantor home loan, or in other words, lenders' preferred 20% deposit.

Co-borrower home loans

When you think co-borrower loans, think - very generally - of couples buying a home together.

Yet while both married and unmarried couples can apply for such loans - often known as joint loans or shared mortgages - so can family members and friends.

The major difference between co-borrower and co-signer or guarantor loans is that both borrowers will legally own the home and be named on the property title.

In other words, co-borrowers are both financial backers - to each other - as well as co-home owners.

However, in a similarity to co-signer and guarantor loans, lenders will assess both borrowers' financial details including credit history and income.

This could enable co-borrowers to apply for a larger mortgage than they could have done as an individual borrower and also lead to better mortgage terms and conditions including lower interest rates.

In this way, a co-borrower loan can be a win-win for people struggling to purchase on their own.

At the same time, each borrower is responsible for repaying the loan and also shares the benefits and responsibilities of home ownership.

They also have a legal right to own the property once the loan is fully repaid.

Finally, a co-borrower loan does not need to be split equally in half.

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