A mortgage co-borrower is A borrower and a co-borrower

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Most often, when applying for a mortgage, the amount issued by the bank is not enough to purchase a home. In such situations, the borrower resorts to the help of a co-borrower. About who a co-borrower is and how he can help, will be discussed in this article.

Who is a co-borrower

A mortgage co-borrower is a person who is liable for a mortgage loan to the lender together with the main borrower. In other words, he will have to repay the mortgage loan if the main borrower is unable to do so.

Usually, the help of a co-borrower is resorted to if the bank considers the client's income for mortgage payments insufficient. There can be two ways out: agree to cheaper housing, or another option - a mortgage for two.

Who can become a co-borrower

Depending on the conditions and requirements of the bank, there may be several people repaying the loan, but no more than four or five. A co-borrower on a mortgage is not only a spouse, as well as relatives, but also any other person. However, each bank may have different conditions, so before youto apply for a loan, you need to clarify all the details.

According to the legislation of the Russian Federation, a legal spouse is automatically recognized as a partner in a mortgage loan. However, in the event that the spouses do not wish to be jointly responsible for mortgage payments, or the share of the acquired residential property will be different, then it is necessary to conclude a prenuptial agreement.

If the co-borrower is a friend or acquaintance of the main payer, then he must know and understand that he becomes exactly the same responsible person to the creditor, and in case of unforeseen circumstances he will have to repay mortgage payments with the right to further ownership of housing.

Required documents

The set of documents that the mortgage co-borrower will have to submit are the same documents as for the main borrower, namely:

• Passport.
• Certificate of pension insurance.
• Document confirming registration at the place of actual residence.
• Identity documents of all those who live with him (minor children, spouse, parents).
• Employment book.
• Certificate of proof of income.
• Document of education.
• Other documents as requested by the bank.

Co-borrower income

Different banks treat the income of a co-borrower differently. For some, their salary is not so important, while others considera candidate for a joint mortgage loan is no easier than the main borrower. For example, a co-borrower on a mortgage at Sberbank must confirm his solvency, and the amount of his salary must correspond to the required percentage of the payments paid. That is, almost the same requirements are imposed on him as on the borrower.

Mortgage co-borrower: rights and obligations

The borrower in any situation is liable in the same way as a co-borrower on a mortgage. Property rights can be specified in the mortgage lending agreement, that is, they can be either equal shares or divided into certain parts independently.

In the mortgage agreement it is necessary to indicate to what extent loan payments will be repaid in solidarity. So, for example, a co-borrower on a mortgage at Sberbank can repay the debt jointly with the borrower in equal shares. There is also another option in which the co-borrower will only repay payments if the borrower is unable to do so.

In any case, responsibility and rights are divided equally between mortgage debtors. Therefore, all financial relationships between the borrower and the partner in the mortgage must be documented, especially if they are not relatives.

Co-borrower and credit history

Banks are very attentive to the credit history of customers, that is, how they repaid loan payments in the past. For fifteen years, credit reports of all citizens are stored in the credit bureaus. Russia. And it does not matter which bank the previous money loan was issued in, the main thing is that the credit history is positive. This applies to both the borrower and the co-borrower. In the event that one of them has a negative history of repayment of credit loans, the bank has the right to refuse to issue a mortgage to both.

There is one more subtlety here. In the event that the borrower, for some reason, becomes insolvent and the co-borrower cannot repay the mortgage loan on his own, then the credit history of both will become negative. Thus, wanting to help, a person, along with the main debtor, can be included in the list of unreliable and unscrupulous clients. And this can have a very negative impact in the future if you want to get a new loan.

Co-borrower and guarantor

Many people think that a mortgage co-borrower is the same guarantor. However, this is not the case, although their functions are similar.

The guarantor is the guarantor of the return of funds issued by the lender, but at the same time does not have the right of ownership of the housing or real estate purchased on a mortgage. Also, when applying for a cash loan, the guarantor may not present the bank with a certificate confirming income.

Also, another difference between a co-borrower and a guarantor is that the guarantor's income is not taken into account when calculating the maximum loan amount and cannot affect the borrower's income. But the income of the co-borrower, on the contrary, is attracted if the borrower does not have a high enough level of salaryfees.

In the order of repayment of loans, the guarantor is in last place, that is, initially the debt is paid by the borrower, then, in case of insolvency, the co-borrower begins to pay, and only then the guarantor, if the borrower and co-borrower cannot repay the loan.

Bank conditions for co-borrower

Since the borrower and co-borrower in the mortgage have the same rights and obligations to the bank, then he sets them the same requirements. Thus, a citizen of the Russian Federation at least eighteen years old, who is both in the degree of relationship with the main borrower, and not, can become a mortgage partner. One of the main conditions of the bank, which guarantees the return of the issued mortgage loan, is the presence of a continuous work experience of at least six months at the time of application.

Under the law, the borrower's spouse is automatically recognized as a co-borrower, and you don't even have to apply. If the spouse does not have a high enough income, then the bank may put forward a condition for issuing a mortgage loan - attracting one or two more co-borrowers. Most likely, young spouses will not want to share their housing with friends or acquaintances, so they can choose parents or close relatives as "helpers".

Risks

First of all, the risk is, of course, more co-borrowers than mortgage borrowers. Wanting to help, many do not think about the possible consequences and possible problems. A mortgage loan is not repaid for several months, but is taken for many years. Therefore, suchtroubles like illness, disability and other surprises can hurt the co-borrower's pocket. This is especially true in cases where the contract states that all obligations are fully transferred to him in a situation of insolvency of the main debtor.

It also happens that parents become co-borrowers of young spouses, pledging their own real estate, and when their children suddenly divorce, they find themselves in an extremely unpleasant situation - debts and a mortgage.

If friends decide to help and take on such responsibility, and after a while the borrower becomes insolvent and refuses to pay the loan, the bank will withhold loan payments from them. And it's good if in the future the borrower will be able to return the spent funds to co-borrowers.

There is another feature when a mortgage is drawn up between several people. Sberbank, as well as many banks, may refuse a co-borrower when he decides to buy an apartment on credit for himself due to insufficient free funds in the total amount of income.

As you can see, there are a lot of risks for a co-borrower, and before you become an assistant in such a responsible event as buying an apartment, you should think many times so as not to lose friends and relatives later.

Credit insurance

In order not to get into a difficult situation, each party must know their rights when applying for a loan, including the co-borrower. The rights when applying for a mortgage loan, as mentioned above, are very similar between debtorscredit. But the main thing that a co-borrower should do is to insure himself.

Being a guarantor of loan repayment, you should insure your legal capacity, and in case of insolvency, the insurance company will take on the mandatory payments. Thus, the insurance policy provides timely guaranteed payments of mortgage debt in case of unforeseen circumstances.

Sometimes colleagues who bought real estate for business become co-borrowers. Accordingly, when paying jointly a mortgage loan, they need to insure both the property and their legal capacity.

The insurance contract is concluded in almost all banks, especially if the mortgage lending service. Sberbank, for example, when applying for an insurance policy, in some cases cancels commissions so that customers are most interested in the service of this bank.

Insurance is beneficial not only to co-borrowers, but also to the bank itself. It provides guaranteed payments and protects against many problems such as debt collection, financial loss.

Getting a mortgage loan together with co-borrowers is a very serious matter, therefore, when concluding an agreement, it is necessary to carefully study it and clarify all contentious issues.