Following the housing market collapse at the end of the last decade, many borrowers have found it increasingly difficult to acquire home mortgage loans, due in part to lender criteria regarding borrower income, assets, and other factors. In response, some borrowers choose to secure mortgage loans by utilizing a co-borrower; by sharing responsibility of both the mortgage loan and the property ownership, co-borrowers can significantly improve a borrower’s chances of obtaining a mortgage loan and have several unique advantages.
By definition, a co-borrower is any additional borrower whose name appears on the documentation for the loan and whose criteria regarding income and credit history are considered for the qualification and approval of the loan.
In other words, borrowers may choose to acquire a mortgage as a collective of two or more; in these instances, the co-borrowers each have equal responsibility over the repayment of the loan, as well as equal title ownership over the property.
While similar in many ways, a co-signer plays a slightly different role than a co-borrower. By definition, a co-signer is person who willingly assumes partial accountability over a borrower’s loan, agreeing to accept responsibility of repayment in the event that the primary borrower defaults on the loan. Unlike co-borrowers, co-signers do not hold equal share of the property, and borrowers typically employ co-signers in cases where they cannot qualify to receive the mortgage loan solely by their own criteria. Whereas co-borrowers receive equal rights of ownership on the property, co-signers simply exist to step in if the mortgage cannot be repaid.
If a co-borrower relationship must end for one reason or another, the process of dissolution can be somewhat challenging, although there are two primary methods for dissolving a co-borrower relationship:
All factors considered, a co-borrower arrangement can be a tremendous way to secure a larger mortgage loan or to simply qualify, although they should generally be employed for long-term commitments only, as removing a co-borrower can be difficult.
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