Co-borrowers on a mortgage jointly share both the risks and the benefits associated with the loan. When two or more individuals are jointly liable for a mortgage, they equally share the responsibility for repaying the debt. This arrangement increases the combined income used to qualify for the loan, potentially enabling a larger loan amount than a single applicant could secure.
Both parties are equally responsible for timely mortgage payments, which means that a missed payment by either party could negatively impact both individuals' credit scores. Each co-borrower shares an equal ownership stake in the property and their names appear on the property title.
Financial benefits can be realized through shared equity gains as property values rise, and each co-borrower can derive tax benefits associated with mortgage interest. However, joint ownership means that decisions regarding the property require mutual agreement, which can lead to complications if co-borrowers have differing financial goals or if circumstances change, such as in the event of a breakup or financial disagreement.
Prior to entering a co-borrower arrangement, careful consideration of credit histories, financial stability, and clear communication about financial goals is crucial. A written agreement between co-borrowers can help outline responsibilities and processes for potential changes in the ownership or liability structure in the future.
Related reading: how DTI is calculated and the pre-approval process.