Definition: A co-borrower, sometimes referred to as a co-signer, is an individual who shares the responsibility for a loan along with the primary borrower. Co-borrowers are equally liable for the loan repayments and have their credit profiles affected by the loan’s performance. Their income and creditworthiness can also enhance the primary borrower’s ability to qualify for a mortgage or secure more favorable terms.

Key aspects of a co-borrower arrangement

• Shared liability: Both parties are legally bound to repay the mortgage. If the primary borrower defaults, the co-borrower is equally responsible for the debt.
• Ownership rights: Depending on the loan agreement, the co-borrower may have equal ownership rights to the property.
• Credit impact: Positive or negative payment history affects both the primary borrower’s and co-borrower’s credit scores.

Common uses

Co-borrower arrangements are often used when the primary borrower needs additional income to qualify or seeks to improve loan terms. Parents or close relatives sometimes act as co-borrowers to help family members with limited credit histories qualify for a mortgage.

Last modified: November 5, 2024