How to stop being a co-borrower on a mortgage?

Who is a co-borrower?

A co-borrower is involved in lending if the main borrower does not have enough monthly income to repay the loan independently. When drawing up an agreement, the bank will consider the income of the co-borrowers in the aggregate and the chance of getting a loan is higher, and the amount that the bank agrees to issue is greater.

There may be several additional payers under a mortgage agreement. It is to them that the bank will turn if the main borrower has difficulties repaying the debt.

Such agreements have their own specifics:

• co-borrowers are jointly and severally liable to the bank under the mortgage agreement;
• the agreement is signed by all contracting parties;
• co-borrowers may be co-owners of the mortgaged property;
• if the main borrower for some reason ceases to fulfill its obligations under the agreement, they are transferred to the second signatory automatically.

Why are additional participants needed in principle?

They are jointly and severally liable for the loan with the main debtor, their income is taken into account when calculating the maximum loan amount, and if the main client is unable to pay his obligations, then a co-borrower or guarantor (if any) will fulfill them.

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But there is one pitfall here: all people who have equal rights to a loan with you can also have ownership rights to a share in the purchased real estate.

• It may happen that you successfully paid off the loan, and another person decided to improve their living conditions at your expense and lays claim to part of the housing.

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• Or, as an option, married couples or people in a civil marriage draw up a loan agreement for housing in common ownership, and then, for one reason or another, separate.

In this case, a completely logical question arises: who owns the purchased apartment, and how to divide the monthly payments? And what to do if the main borrower deliberately avoids paying the debt, and the co-borrower, who was formally involved, is forced to answer calls from the bank debt collection service.

The difference between a co-borrower and a guarantor

The participation of a co-borrower in a loan agreement presupposes the use of the loan equally. His rights and obligations are the same as those of the main borrower. In addition, he has the right to a share in real estate purchased with a mortgage. And, accordingly, will be able to take advantage of tax deductions.

Note! The borrower's spouse will automatically be a co-borrower, and the purchased property will be joint property.

A guarantor is a measure of security for a loan. Its involvement is necessary for the bank to reinsure its own risks. If the borrower is unable to repay the loan, the bank will recover these funds from the guarantor. When deciding whether to issue a loan, the bank will not take into account his income.

The legal consequences of the participation of a guarantor and a co-borrower in a loan agreement are also completely different.

The liability of the guarantor can be subsidiary (partial) or joint and several (full). In this case, the guarantor does not have rights to mortgage housing. Having repaid the loan for the borrower, the guarantor has the right to recover from him this amount and all costs associated with its recovery through the court.

If both guarantors and co-borrowers are involved in the loan agreement at the same time, then in the event of bankruptcy of the borrower, the co-borrowers are held accountable first, and only then the guarantors. In this case, the guarantor will begin to pay the loan only after the court makes an appropriate decision.

In practice, most often the main borrower uses credit funds, and a co-borrower is involved to increase the credit rating. But if one of the co-borrowers is on the verge of bankruptcy, the second may have serious problems with the bank.

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.

Video on the topic

MortgageGuarantorCo-borrower

Author:

Vladislav Kvitchenko

CEO . Practicing lawyer in the field of bankruptcy of individuals. persons Since 2015, she has been successfully handling insolvency cases. Vladislav is brilliantly versed in bankruptcy law, gives expert comments on legal situations and actively publishes in specialized publications.

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.

Will the bank agree?

The bank will not make changes based on one request from the payer - there must be good reasons.
What explains the creditor's actions? Firstly, it is simply unprofitable for him. As the number of co-borrowers decreases, the total income that covers the loan decreases. Secondly, the chances of delay increase. The reason must be compelling for the credit institution to take the payer’s side. It is important to present strong arguments, as well as provide evidence confirming important circumstances - separation of spouses, death of one of them, deterioration or, conversely, improvement of solvency, moving to another region.

It will be a big plus if the borrower can confirm an increase in income or attract another co-borrower to increase the loyalty of the financial institution. The new party to the agreement will also be subject to a bank audit, and therefore must meet the requirements of Sberbank:

• confirm Russian citizenship;
• meet age requirements;
• have a good credit rating;
• have worked in your last position for more than 6 months;
• officially confirm income and employment.

If you have difficulty finding a co-borrower, it is advisable to provide the lender with documents confirming the increase in income. This amount should be enough to cover the debt on your own, and the monthly payment should not exceed a third of your earnings. You can confirm your salary with document 2-NDFL, which officially certifies your income growth.

How long does it take to process an application?

The bank is officially given 10 days to approve the payer’s application.
By the end of the period, the financial institution must notify the payer of its decision. There are only two options:

1. If the result is positive, you need to come with the same co-borrower to a Sberbank branch, where you sign an additional agreement, make changes and register them in the regional Rosreestr together with the bank representative.
2. If the decision is negative, it is worth searching for evidence and compelling arguments so that the financial institution reconsiders its decision. If there are sufficient grounds, you can go to court, but in this case the case may drag on for several months. It is better to try to negotiate with the bank.

Unfortunately, even court proceedings cannot oblige the creditor to make changes to the agreement. The desire of the payer and co-borrower is not enough - there must be a valid reason. For example, a promotion and an increase in the payer's income would be suitable. Thus, it will not be possible to unilaterally remove a co-borrower from the mortgage. You need to visit the Sberbank mortgage department and write an application. The credit institution will consider the payer’s application individually and evaluate his arguments.

How is a loan agreement with the participation of a co-borrower drawn up?

Despite the fact that the agreement is drawn up with the participation of the co-borrower, the registration procedure is standard. The only difference is that the loan agreement specifies the personal data of the main borrower and co-borrower. Their obligation to pay the amount owed is also specified.

3 stages of completing a transaction:

1. The borrower and co-borrower contact the bank with a complete package of documents to complete the application.
2. The bank reviews customer data and makes a decision.
3. A day and date is set for signing the loan agreement. On the appointed day, both parties to the mortgage agreement must come with a complete package of documents.

Additionally, it should be taken into account that the agreement is concluded in 3 copies, for each of the parties. Each participant in the transaction puts his signature on the agreement

.

Popular reasons for transferring a mortgage to another person

It is allowed to transfer a loan to another person only with the voluntary consent of the creditor organization in which the housing loan was issued. To start the procedure, you must submit an application indicating the reasons for such a step. After assessing them, the bank will make a decision and inform the client about it.

Frequent reasons for re-registration (re-registration) of a mortgage loan:

• transfer to a third-party financial and credit organization;
• change in marital status;
• death of the borrower;
• financial difficulties of the borrower.

Transfer to another bank

Banks constantly compete with each other, so they try to attract customers with tempting mortgage lending conditions. A lower interest rate is usually offered. A mortgage borrower does not need the consent of his lender to switch to another bank.

Sequencing:

1. Concluding an agreement with another financial organization.
2. Receiving the money.
3. Paying off a debt from an old bank.

Expert opinion
Irina Bogdanova

Expert in the field of mortgage lending.

Today, Sberbank has the most favorable lending conditions, so it is not advisable to change it.

Change in marital status

During the period of repayment of the mortgage loan, the client’s marital status may change, when the need for an apartment disappears. A frequent case is the divorce of spouses, when the property remains in the use of one, and the mortgage is issued to the other. In this situation, the question of re-registration arises.

It is enough to provide the bank with a divorce document and a certificate of the successor’s solvency. Then you can count on a positive decision from the lender.