Who is a co-borrower, how to become one and why? How to stop being a co-borrower?

The role of the co-borrower during the transaction

This person is jointly and severally liable under the mortgage agreement. In addition, the income of the co-borrower will also be taken into account when calculating the eligible loan amount. If the main borrower is unable to fulfill his debt obligations in full, then they pass to the share of the co-borrower.

However, do not forget about the most important condition. Persons who bear equal debt obligations with the main creditor may also claim ownership of the purchased apartment or house.

There are several reasons for changing the co-borrower under the mortgage agreement:

At the time of execution of the agreement, the parties to the transaction were on friendly terms, there were no prerequisites for a conflict situation. However, over time, the second participant in the transaction decided to improve his financial situation by appropriating part of the mortgaged housing.
The transaction was formalized by people who were in an official or civil marriage. However, then they decide to get a divorce and distribute debt obligations.

In such a situation, the borrower does not know who will own the purchased property and who must make monthly payments.

Does the mortgage co-borrower have a share in the apartment?

In the case of married couples, property can be divided. The division can occur peacefully by concluding an appropriate agreement with a notary, or it can also occur through the judicial authorities;
By agreement of all parties to the loan agreement. It is important to understand that in addition to the borrower and co-borrower, there is a lender (bank), which must also appear and be a party to the agreement;
By agreement of the borrower and co-borrower. First of all, you should try to resolve everything peacefully and conclude an agreement where all property will be divided. If it is not possible to divide the property amicably, the division can take place through the court.

Not younger than 21 and not older than 70. The co-borrower cannot be younger than 21, but the upper threshold often varies;
Official employment. It is worth understanding that any entrepreneur can be a co-borrower;
The co-borrower has income that makes it possible to repay the mortgage loan on his own if for some reason the borrower does not do so.

Change of co-borrower

If any incomprehensible situations arise regarding the fulfillment of the terms of the mortgage agreement, you must contact the bank where the transaction was concluded. You must have your passport and the original mortgage agreement with you. This document sets out in detail a complete list of the rights and obligations of each of the parties to the transaction, and also regulates their property rights.

Sometimes situations arise when disagreements occur between the main borrower and an additional participant regarding the issue of property rights to the object of the transaction, as well as regarding the topic of dividing loan obligations. In such a situation, the only way out is to remove the co-borrower from the transaction. This procedure will help avoid worsening the conflict between the parties.

After the withdrawal of an additional participant, ownership of the property is completely transferred to the main borrower. In this case, responsibility and credit obligations fall entirely on the shoulders of the main mortgage participant.

However, not everyone knows the specifics of the procedure for removing a co-borrower. It is immediately worth noting that this issue should be dealt with by the financial institution where the mortgage agreement was signed. This is where you need to bring an application requesting the withdrawal of one of the participants.

Does the co-borrower have rights to an apartment registered with a mortgage?

For 8 years he has been regularly paying the loan, and now he has decided to sell the mortgaged apartment by the end of the year. The bank gave official permission to sell the apartment. But in addition to this, you need to obtain permission to sell the apartment from your ex-wife, who acted as a co-borrower, but she does not give it. The condition is that he must sign over to her his half of the apartment, which has already been completely divided (he wants to get the other half).

The exclusive right to the result of intellectual activity belonging to the author of such result (Article 1228) is not included in the common property of the spouses. However, income received from the use of such a result is the joint property of the spouses, unless otherwise provided by an agreement between them.

How will the bank react to the withdrawal of a co-borrower?

Such a decision will not be accepted with joy by the bank. This procedure increases the lender's risks. If such a transaction is approved, the number of participants in the transaction will decrease, therefore, the amount of total income will decrease. All this can lead to the fact that debt obligations will not be fulfilled on time and in full.

To obtain approval from the bank, a compelling reason must be voiced:

Divorce proceedings.
Changing of the living place.
Death of a co-borrower.
The additional participant cannot fulfill debt obligations to the same extent.

Only in this case can the bank accommodate the applicant halfway.

The guarantor of an approving decision can be the attraction of a new participant who agrees to assume debt obligations. In most cases, such a decision increases the chances of a successful outcome of the case. Do not forget that a new participant must go through a verification procedure. It must fully comply with all the stated requirements from the lender:

Availability of Russian citizenship.
Age from 21 to 75 years.
Having a good credit history.
The period of work experience at the current place of work is at least 6 months, the period of total experience is from one year.
Certificates of salary level and certificate of position held must be provided.

However, it is not always possible to find a person who is willing to participate in the transaction and share the loan obligations. In this case, the main participant in the transaction must provide the relevant documents. They must confirm that he has a level of income that is sufficient to make monthly payments only on his own.

Important! The borrower can provide a 2-NDFL certificate, which will prove that the level of income has recently increased. This means that the loan can be repaid without the participation of a co-borrower.

Typical reasons for refusal to re-register a mortgage to another person

Reasons why a bank may refuse an applicant to transfer debt obligations to another person:

presence of a criminal record and administrative offenses;
damaged credit history;
a large financial burden on the family budget (mortgage payments take more than 50% of total income);
the potential borrower has a bad reputation on social networks (provocative photos, dubious videos, etc.);
failure to provide documents confirming stable income and work activity;
unkempt appearance and inappropriate behavior noted by bank employees during the interview;
low income.

Along with typical reasons for refusal to re-register, there may be others. Bank employees take into account the applicant’s place of work. If the company does not inspire confidence and operates at a loss, then the re-registration of the mortgage loan will be refused. Relatives of the future debtor also come under close scrutiny.

What to do if re-registration is refused

The bank retains the right to refuse the current counterparty to re-issue a housing loan to another person. In this case, the borrower can sell the mortgaged property, subject to the consent of the lender, and pay the amount received to pay off the debt. If consent is not received, all that remains is to continue making payments.

An alternative solution could be a consumer loan, which the potential successor will apply for in another bank. He transfers this money to the account of the apartment owner for early repayment of the loan and cancellation of the encumbrance.

Application review period

Officially, the bank has the right to consider such an application within 10 days. As soon as this period expires, the financial institution must announce its decision.

When receiving a refusal, applicants try to prove their case in court. However, the court does not have such powers to oblige the bank to agree to such a transaction. The main argument can only be strong evidence.

It will not be possible to remove the co-borrower from the mortgage transaction on your own. In any case, you have to contact the bank and write an application. Each such document requires individual consideration. Therefore, no one will be able to say in advance whether the bank will agree to changes in the terms of the transaction.

Risks of a co-borrower when participating in a mortgage transaction

There are many risks that an additional participant faces:

Not every citizen knows the rights and obligations of a co-borrower. Many try to help out loved ones and agree to act as additional participants. However, not everyone really appreciates that debt obligations fall on them. The mortgage is issued for a long term, sometimes it can reach 30 years. No one can guarantee that the title borrower will maintain his financial security. In the event of an emergency, the bank will reduce the credit rating for all parties to the agreement. Therefore, the co-borrower should not hope that the bank will soften or reduce the requirements if something happens to the title borrower.
When concluding a mortgage agreement, the income of the additional participant will be taken into account when calculating the maximum allowable amount. Therefore, you should expect that during the term of the mortgage agreement it will be quite difficult to get another consumer loan. The database will display information that you are already a participant in the mortgage transaction.
If the co-borrower decides to leave personal property as collateral, then this option can become risky. In case of violation of pledge obligations, this property may become the property of the bank. Therefore, you should first think about whether it is worth exposing yourself to such a risk.

Insurance can come to the rescue in any of these situations. However, it may not cover all costs. Registration of an insurance contract will also impose certain costs.

Here's what an additional participant in the transaction should remember:

The concluded agreement will impose debt obligations on the participants that will last for quite a long time.
Any violation of the terms of the agreement may cause conflict situations not only with the title borrower, but also with the bank itself.

What rights does a mortgage co-borrower have to an apartment?

degree of responsibility (joint and several/subsidiary);
the procedure for the co-borrower to bear obligations under the loan in the event of the inability of the main borrower to bear its obligations;
determining the rights of a co-borrower to an apartment purchased with a mortgage, including if he is not a spouse or is a common-law spouse.

Despite the fact that the status of a co-borrower, with minor exceptions, is similar to the status of a borrower, this applies only to the conditions of the credit legal relationship. This is important because, when becoming a co-borrower, many often view this situation as an opportunity to unconditionally qualify for the apartment purchased with a mortgage . In fact, the status of a co-borrower in itself does not provide for anything like this, with the exception of situations where an apartment purchased with a mortgage itself gives the co-borrower the right to claim it. For example, a spouse receives such a right not because he is a co-borrower, but because the apartment will have the status of jointly acquired property. At the same time, acting in the status of a co-borrower, the common-law spouse, unless otherwise provided by a separate agreement between the parties or when registering the apartment, will not have any rights to the apartment purchased with a mortgage. The same can be said about all other situations in which the right to an apartment (share) requires an agreement between the borrower and the co-borrower , and cannot be acquired by force of law, as in the case of marital relations.

We recommend reading: Petition for Examination of Land Boundaries

Examples of co-borrower participation in a mortgage transaction

When the sister's participation is specified as part of the mortgage agreement, her loan obligations can only be transferred to her close relatives. Their participation in the transaction occurs solely on a voluntary basis.

In the event of the death of a co-borrower, a certificate from the registry office must be prepared. In this case, the terms of the contract will be changed without difficulty.

Problems may arise if the participation of the co-borrower was caused by the fact that the income of the title borrower was not enough to cover the debt obligations. In this case, the lender may impose the following conditions:

Re-provide evidence that the title borrower has the required income level to make the monthly payments.
Attracting an additional participant to the transaction.

Sometimes a co-borrower decides to independently refuse to participate in the transaction in order to obtain his own loan or mortgage. However, in such a situation certain difficulties may arise. Even if the main borrower can prove his sufficient financial security, the contract cannot be terminated on a voluntary basis. The issue can only be resolved in court. The court rarely takes the side of the borrowers; in most cases it supports the financial institution.

Important! You can count on a positive decision from the bank to remove the co-borrower from the agreement if the balance of the mortgage debt is small.

Rights and obligations

Rights of a co-borrower under a mortgage:

Can a co-borrower claim a share in the property of the purchased property? A co-borrower is a full-fledged participant in the mortgage; he has rights to a share in the jointly acquired property. The co-borrower must determine his share together with the other borrowers (the person who took out the mortgage and the other co-borrowers, if any). Moreover, if the co-borrower refuses to act as a co-owner of the purchased property, the bank will not relieve him of responsibility for the mortgage. A person can act as a co-borrower even on several loans at once, but it will be difficult to apply for a loan for himself as the main borrower.

Russian legislation allows the division of joint mortgage debt between the borrower and the co-borrower. This is possible in the following cases:

During the process of dividing property division by divorcing spouses. Such issues are resolved both through a regular settlement agreement and through the court.
With the consent of all participants in the mortgage agreement - the borrower, all co-borrowers and the financial institution in which the agreement was concluded.
If the borrower and co-borrower came to a common opinion and independently determined the rights of each to the housing encumbered with a mortgage. If the parties have not reached an agreement, this problem can be resolved through the court.

The rights of a co-borrower to the purchased property depend on:

Registered housing status;
An agreement, contract or marriage contract concluded between the borrower and the co-borrower. Such a document may contain many aspects about the rights of a co-borrower to housing: in what cases a co-borrower can apply for housing, the boundaries of his rights, duties and responsibilities, etc.
An encumbrance on housing under a mortgage imposed by the bank.

Responsibilities of the co-borrower:

The responsibilities of the borrower and co-borrower are equal. This means that a co-borrower cannot refuse to pay the primary borrower's mortgage debt under any circumstances. The main responsibility of the co-borrower is to fully repay the mortgage debt if the borrower is unable to do so.

As a rule, the loan agreement contains information about the specific duties and responsibilities of the co-borrower to the bank. This document may stipulate, for example, the procedure for repaying the loan - first the co-borrower can repay the debt, and then the main borrower. Or the equal responsibility of the debtors may be prescribed - and they will pay off the loan in equal shares at a time.

Therefore, the main recommendation when registering as a co-borrower is the following: the relationship between the borrower and the co-borrower must be documented if they are not relatives. Many banks even recommend that young couples first get married, and only then act as a borrower and co-borrower - this will help them avoid confusion in any financial conflicts.

Mortgage co-borrower: His rights and responsibilities are detailed in the main mortgage document. Read the mortgage agreement, you will find a sample of Sberbank in our last post.

What to do after approving the withdrawal of a co-borrower from the agreement

If the court sided with the borrower, or the bank independently approved such a decision, you can do one of the following methods:

Draw up a new agreement under which obligations will be distributed between the participants. Amendments will also be required to the text of the mortgage.
You can sign a new agreement, which will indicate the attraction of new participants.
A bank employee may suggest drawing up an additional agreement. However, you will need to attach this paper to the main package of documents.

Any adjustments to the current terms of the agreement will become additional risks for the bank. Therefore, the borrower will have to be patient if he intends to change the borrower in the mortgage agreement. You will need to provide reasoned evidence and worthy alternatives for the bank.