Relationships are all about making a commitment. After saying the "I-do's" and committing to each other, couples may want to take the step toward homeownership, requiring another type of commitment: the mortgage. When two people open a mortgage together, one is named the primary borrower, the person in charge of the mortgage, and the second is named the secondary borrower, the person signing the mortgage along with the primary. Determining who will be the primary and secondary borrowers depends on the type of joint mortgage opened and whether the borrowers are co-owners or co-signers.
In joint mortgages where the two people are married or cohabitating and will be sharing ownership of the home, the primary borrower is designated based on credit score and income. Lenders have done away with the antiquated method of automatically assigning the husband as primary borrower, assuming he makes the most money and has a better credit score. Now the primary borrower is the person with the best credit score, because a higher credit score equals a better interest rate. If both borrowers have similar credit scores, lenders will list the person with the higher income as the primary borrower.
A borrower who has bad credit and cannot get a mortgage himself can ask another family member or friend who does have good credit to open the mortgage with them and be his co-signer. In these cases, the person opening the mortgage who will be the owner of the home would list himself as primary borrower and the co-signer as the secondary borrower. The primary borrower can use the co-signer's credit score to help get a better interest rate and qualify for the loan. Co-signers have no ownership interest in the property being purchased in these situations, and will not be listed on the deed to the home.
In both a co-owner and co-signer situation with a primary and secondary borrower, both borrowers have the same obligations to the loan. While the primary borrower is responsible for making the monthly mortgage payments, the secondary borrower will be held financially responsible if those payments are not made on time. If the primary borrower defaults on a mortgage loan, both his and the secondary borrower's credit will be affected.
As with any major commitment, relational or financial, each party must consider the consequences of that commitment ending. With a joint mortgage, even after a divorce or breakup, both the primary and secondary borrower are fully responsible for the repayment of the loan. For one of the parties to get out of the loan, the mortgage must be refinanced with just one person listed on the application.
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