Adding a co-borrower (or co-applicant, co-signer, or guarantor) can be beneficial as doing so could bring additional income and assets to the table. The combined income between the two of you may allow you to qualify for a larger loan amount, since you can afford higher monthly mortgage payments together.
By contrast, a co-borrower benefits from the loan directly. Lenders may also offer lower interest rates and higher loan amounts, especially if both borrowers have good credit. And since each borrower has equal responsibility, you may not need to provide additional collateral to secure the loan.
For a mortgage lender, it's certainly better to have two people on the hook than one. Even two flakes give you a better chance at getting repaid than one long-shot borrower. In exchange, lenders will tend to lend more to two signers on a mortgage. Of course, there are downsides for the borrower.
Adding your partner's name to your mortgage through remortgaging offers potential benefits like joint ownership and improved borrowing power. However, it will involve a whole new application, with joint credit checks and potentially higher interest rates if their credit score is lower.
Even if the lender looks at the lowest credit score alone, a joint mortgage still has its advantages. The extra income and additional assets a co-borrower provides can lower the overall debt-to-income ratio (DTI) of the application, helping you to get a bigger loan, or to qualify in general.
We know this will not be easy for you, but you can do it. Your mortgage loan will most likely need to be fully refinanced. Adding a new person to your mortgage loan changes the loan's terms. You won't be able to change these terms unless a lender creates a new loan for you through a mortgage refinance.
The cons. You'll need to decide on the best way to set up your joint mortgage legally. You need to think about what happens if one of you defaults on the mortgage as you could both be responsible for any missed repayments. It's important to buy a property with someone you trust to protect against this kind of situation ...
In most cases, the responsibility of the mortgage will be passed to the beneficiary of the home if there is a will. If you applied for your mortgage with a co-borrower or co-signer, the solution is relatively simple: The other party must continue paying the loan.
A good way to remember the documentation you'll need is to remember the 2-2-2 rule: 2 years of W-2s. 2 years of tax returns (federal and state) Your two most recent pay stubs.
Since co-borrowers are both liable for the debt, any past-due payments have the potential to hurt both parties' credit scores. Then again, on-time payments can help boost both borrowers' credit scores. Most often, a co-borrower will have shared ownership of the funds or asset purchased with the loan.
Once you have a mortgage on your own, you cannot add a co-borrower without refinancing the loan. Many mortgage lenders allow co-borrowers, but some may not. The requirements for a home loan will vary by lender.
When evaluating borrowers for a joint mortgage, the lender cares less about who is listed first, and more about the sum of the applicants' earnings and debts. In general, the lender evaluates the application the way the applicants submit it, without regard to whose name is listed first.
Benefits of a Co-Borrower
While a co-borrower can be beneficial for a lender, it can also help a debtor who is unable to qualify for a loan or favorable loan terms. Having multiple borrowers on a loan can also increase the amount of principal credit approved on the loan.
Adding a person to your mortgage without refinancing can only work if the mortgage is assumable. Federal Housing Administration (FHA) loans tend to be assumable, but other types may not be.
While both share the financial responsibility, a co-signer is not included on the property's title and does not have ownership rights. In contrast, a co-borrower is listed on both the mortgage and the title, holding an ownership stake in the property.
If your spouse passes away, but you didn't sign the promissory note or mortgage for the home, federal law clears the way for you to take over the existing mortgage on the inherited property more easily.
If you can work out an arrangement with the co-borrower, paying off the mortgage will retire the loan and remove all names from the mortgage. This may require additional steps once the sale is complete, as you and the other party may need to work out compensation or ownership after settling the loan.
A title refers to the rights of ownership to the property. Many people assume that as a couple, both names are listed on both documents as 50/50 owners, but they don't have to be. Listing both names might not make the most sense for you.
Joint mortgage responsibility
If both spouses' names are on the mortgage, then both must keep paying, even if one leaves. Whether the spouse lives in the home or not, they remain financially tied to the mortgage until they pay it in full or it gets legally modified.
Yes, someone can be on the title and not the mortgage. The two terms “deed” and “title” are often used synonymously. A person whose name is on a house deed has the title to that particular house. The house deed is the physical document that is used to transfer title and thus proves who owns the house.
Your mortgage doesn't just disappear when you pass away. If you've bequeathed your home to a beneficiary, they'll inherit the balance on your home loan as well as the property itself. If the lender doesn't receive prompt payment, it can impact your credit score or even lead to foreclosure.
Typically, removing a name from a mortgage could require you to pay off the loan in full or refinance it with a new loan. But, there are alternatives where you can take over the loan without paying off it off or refinancing. These could include mortgage assumption, loan modification and bankruptcy.