Co-borrower

Financial Dictionary -> General Finance -> Co-borrower

A Co-borrower or cosigner as it's sometimes known is somebody that shares responsibility for repaying a real estate mortgage with the original borrower. When borrowing a mortgage (a loan to purchase a house) it is the borrower's sole responsibility to make repayments on time and in full, unless they may default, go through a foreclosure process and be forced to lose their home to cover the outstanding balance on the mortgage. Adding a co borrower shares this responsibility and they are equally held responsible for not making payments.

In the eyes of a lender, taking on a co borrower gives them added security, in that if one person gets in to difficulties a second person can also be held responsible. This does not necessarily work out as any more secure than if one person's name is on the mortgage. It could be just that a couple would rather put both of their names on it, but it doesn't mean they won't get in to any financial difficulties. It does however suggest there are two incomes in the household meaning there is likely more money available to make repayments.

In some cases there may be double the amount of collateral in the contract, such as the mortgage borrower's home and the co-signer's own home or other asset, although unless debt is a huge problem there is no pressure to offer two sets of collateral when using a co borrower and the home that mortgage is assigned to is all that is required.

A co signer does not necessarily also have to own part of the property. In many cases it is an ex partner that is required as part of a divorce to help with the mortgage or a parent helping out there child with payments on their first home.