What Is a Co-Mortgagor?

A co-mortgagor is a co-borrower on a mortgage loan. In other words, you can have more than one borrower listed on a mortgage loan when buying a home. The mortgagor is the person borrowing from the lender—called the mortgagee—while the co-mortgagor is the co-borrower. A co-mortgagor also shares in the repayment obligation and property ownership.

Adding a co-mortgagor can benefit a borrower since the income and 澳洲幸运5官方开奖结果体彩网:credit history of the co-mortgagor get included in the loan approval process. However, a co-mortgagor creates certain financial and legal obligations for all parties involved.

Legal Status of Co-Mortgagor

A co-mortgagor is a loan participant who shares in the liability for full repayment of a loan. A co-mortgagor can be the primary borrower's relative or business partner. However, both parties share the same rights and responsibilities.

Typically, an individual applicant brings in a co-mortgagor to improve their odds of getting approved or allow them to apply for a larger loan. When approving the loan, lenders can look at each co-mortgagor's income, assets, and debt for 澳洲幸运5官方开奖结果体彩网:underwriting purposes and calculate their 澳洲幸运5官方开奖结果体彩网:debt-to-income (DTI) ratios.

A lender may be happy to involve a co-mortgagor in the loan transaction because the second borrower lowers 澳洲幸运5官方开奖结果体彩网:default risk to the lender. The co-mortgagor also bears responsibility for repayment if the original applicant cannot make the payments. In exchange, the co-mortgagor enjoys partial ownership of the property and has limited resale rights.

Co-Signer vs. Co-Mortgagor

Althou🅘🐈gh similar, there are distinct differences between a co-signer and a co-mortgagor.

Co-signer

A co-signer acts as a safety net for the primary borrower if they cannot make the payments. Typically, a co-signer becomes involved when the primary loan applicant has poor credit or little 澳洲幸运5官方开奖结果体彩网:credit history. The co-signer has no ownership stake in the property after closing and generally doesn't participate in the monthly payments unless the borrower proves unable to make payments.

If the borrower stops paying, the bank will approach the co-signer to resolve the debt. When considering the application, the lender will focus more on the co-signer's credit rating because that person’s ability to pay will be the ultimate impediment to default. The co-signer's 澳洲幸运5官方开奖结果体彩网:credit score is also at risk if the loan falls through.

Co-mortgagor 

A co-mortgagor also partakes in the loan to help an otherwise imperfectly qualified applicant obtain a mortgage. Instead of serving as a stopgap against default, the co-mortgagor fully participates in the application process and may contribute to regular monthly payments. As equal participants in the mortgage transaction, the co-mortgagors are entitled to some legal protection as if they were one individual. For example, if one borrower declares 澳洲幸运5官方开奖结果体彩网:bankruptcy, the other is protected against creditors regardless of their financial status.

Examples

The classic example of a 澳洲幸运5官方开奖结果体彩网:co-signer is a parent helping an adult child purchase their firsജt property. The parent is involved in vouching for the child and lessening the risk for the꧙ lender but not to making payments.

On the other hand, the most common scenario for a co-mortgagor relationship is spouses purchasing a property together. 澳洲幸运5官方开奖结果体彩网:Business partners would go through a similar process. By applying together, the applicants can generally qu🥃alify for a larger loan.

Do I Need a Co-Mortgagor?

Mortgage lenders do not require you to get a co-mortgagor or co-signer. However, a co-mortgagor may make sense in some scenarios. For example, if you're buying a home with your spouse, you may want to add them as a co-mortgagor to protect their ownership interest in the property. Having your spouse listed as a co-mortgagor could also help you secure lower interest rates or more favorite repayment terms for the loan.

You may also choose a co-mortgagor arrangement if you buy property with a business partner. Having both of your names on the mortgage means you're both financially and legally responsible for the debt and share in the property's ownership.

Risks of Becoming a Co-Mortgagor

Becoming a co-mortgagor can be risky if the relationship goes south or the other 澳洲幸运5官方开奖结果体彩网:borrower passes away. Say you purchase a home as a co-mortgagor with your spouse and later decide to divorce. That may lead to disputes or disagreements over who gets to retain ownership of 澳洲幸运5官方开奖结果体彩网:the home after the divorce is final. One of you may be forced to buy out the other, while the perജson who receives the home may also get the associated mortgage debt.

Being a co-mortgagor could lead to other financial issues if you and the person with whom you hold the mortgage are unable to make good on the payments. Paying late can trigger late payment fees and damage your 澳洲幸运5官方开奖结果体彩网:credit scores. If you're continually missing payments, that could prompt the lender to 澳洲幸运5官方开奖结果体彩网:foreclose, which could harm your credit scores even further.

The Bottom Line

A co-mortgagor may allow you to qualify for more fa🍎vorable loan terms, but also obligates you to repay that debt. Only enter into a mortgage with someone you trust.