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MoMo Productions/Getty Images August 10, 2022 Sarah Li Cain is an experienced content marketing writer specializing in FinTech, credit, loans, personal finance and banking. Her work has appeared in Fortune 500 companies, publications and startups such as Transferwise, Discover, Bankrate, Quicken Loans and KeyBank. Bankrate senior editor for mortgages Bill McGuire has been writing and editing for more than four decades at major newspapers, magazines and websites. Bankrate logo

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What is a co-borrower on a mortgage

A co-borrower, also referred to as a co-applicant, is an additional borrower on a mortgage. In a co-borrowing situation, both borrowers complete an application, and the mortgage lender considers both your qualifications and those of the co-borrower, including assets, credit history and income. Typically, the borrower with the better credit profile determines the terms of the loan. Importantly, both you and the co-borrower can have ownership of the property — in other words, both your names are on the title — and are responsible for repaying the mortgage. A co-borrower isn’t the same as a co-signer. A co-signer doesn’t have their name on the property title, but is responsible for repaying the loan. Generally, a co-signer can be beneficial if a borrower needs help from someone with good credit to . If the borrower fails to pay, the lender has the right to pursue payment from the co-signer. A borrower might ask his parent to be a co-signer on a , for example, since the parent’s credit history and added income and assets can increase their chances of securing a competitive .

Who can co-borrow a mortgage

The following types of people can be co-borrowers or co-applicants on a mortgage: Spouses Domestic partners Friends Relatives In general, any adult that’s willing to assume legal responsibility for repaying a mortgage and wants ownership in the property can be a co-borrower. Each potential co-borrower presents different requirements and liabilities, depending on the type of co-borrower arrangement you choose. For example, a co-borrower (or co-applicant, if you are not married to the other borrower), will both be listed on the title of the home and responsible for paying the mortgage. However, guarantors only have to pay the mortgage if the primary borrower fails to pay. The types of co-borrower relationships are: Type of co-borrower Relationship Financial disclosures? Listed on title? Responsible for paying the mortgage? Co-borrower Spouse/partner Yes Yes Yes Co-applicant Friend/relative Yes Yes Yes Co-signer Friend/relative Yes No Yes Guarantor Friend/relative Yes No Only if primary borrower can’t pay Title holder Spouse/partner, friend/relative Yes Yes No

Does it matter who s the borrower and who s the co-borrower

Since the borrower and co-borrower are equally responsible for the mortgage payments and both may have claim to the property, the simple answer is that it likely doesn’t matter. In most cases, a co-borrower is simply someone who appears on the loan documents in addition to the borrower. Some lenders, however, may indicate a “primary borrower.” The criteria for determining who this person is . Some may define the primary borrower as the person with the higher income, for instance, or as the person who appears first on the application.

When is a co-borrower a good idea

Co-borrowing a mortgage is best when both parties want their name on the property and agree to share the responsibility of paying back the loan. It’s typical for partners or spouses who reside in the same property to be co-borrowers. Having a co-borrower with good credit can also be a good idea if it boosts your chances of being approved for a mortgage (and at the best possible rate), especially if your is on the fairer side. It’s also a good idea if the co-borrower’s financial situation means that you can add additional assets and income to your application. A higher income could mean qualifying for a larger mortgage since it indicates to lenders you can make a higher monthly payment. Make sure you consider the unique financial situation of you and your co-borrower when making this decision. Times when it makes sense to add a co-borrower: When you and the co-borrower have an equal partnership in the property and both benefit from the loan When your co-borrower has strong finances and credit score When a co-borrower has a lower debt-to-income ratio than you

Can a co-borrower come off a mortgage

The short answer is yes. However, while it’s possible to remove a co-borrower from your mortgage — such as if that person is deceased or the loan is completely paid off — the process can be somewhat challenging. That’s because lenders are reluctant to remove borrowers since doing so can increase their risk, and cuts into their ability to collect payments from both parties. Still, you can remove a co-borrower from a mortgage. It may require paying fees (some quite significant) and take some time, but here are a few methods: Speak to your lender. The first logical step is to see what your lender can do. Lenders that are willing to remove co-borrowers may require the remaining borrower to re-qualify for the loan by themselves. That means you’ll need to have enough income to make the monthly payments and a good credit profile. The co-borrower may also be required to sign a document, such as a release of liability. Refinancing your existing mortgage might be a possible solution if your current lender won’t release your co-borrower. Again, you’ll need to have good credit and sufficient income and equity to qualify. Transfer your mortgage. If your mortgage is an , you should be able to release a co-borrower and transfer your mortgage to someone else (ideally, you). Your lender will need to review your credit, and there may be fees to pay. Sell your home. If you’re not attached to the property (say you inherited it), selling it and using the proceeds to pay off the mortgage might be an option to release all borrowers from the debt.

Alternatives to a mortgage co-borrower

but don’t want to add a co-borrower to their mortgage could consider the following: Establish or reestablish credit. Working on can up your chances of getting approved for a loan, or getting approved for a loan with a more favorable interest rate. Building credit takes time, so be patient. One of the easiest strategies to improve your standing is to make on-time payments on any existing balances, or to open a secured credit card and do the same. Pay down debt. Paying down your debt decreases your debt-to-income (DTI) ratio, showing lenders that you have the means to take on a mortgage by yourself without stretching your finances too thin. Consider an or . Both the FHA and VA loan programs have less strict credit and down payment requirements, which can help you qualify for a loan independently. SHARE: Sarah Li Cain is an experienced content marketing writer specializing in FinTech, credit, loans, personal finance and banking. Her work has appeared in Fortune 500 companies, publications and startups such as Transferwise, Discover, Bankrate, Quicken Loans and KeyBank. Bankrate senior editor for mortgages Bill McGuire has been writing and editing for more than four decades at major newspapers, magazines and websites.

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