A co-borrower can help you qualify for a good loan or interest rate, especially if he has a good credit score or high monthly income. This potentially rosy situation is not without its thorns. A co-borrower could bring some bad things into the arrangement, and you'll have to follow some strict rules to make it all work legally.
Can You Have a Non-Occupant Co-Borrower on a Conforming Purchase?
The person sharing your house bills doesn't have to share the home if you have a conforming loan. In fact, adding a non-occupying co-borrower to your loan can help make up for a short credit history, heavy debt or limited savings. However, according to Fannie Mae, this won't make up for more serious problems on your credit report, such as recent bankruptcy.
Can You Add a Co-Borrower to Refinance an Auto Loan?
Yes, you can, but there are serious risks for the co-signer according to the Federal Trade Commission. Adding another borrower to your refinance qualifies you for lower interest rates when the other co-signer has a good credit score or high income. However, if the co-signer's name isn't on the title, he shares equal responsibility for paying the debt but doesn't own the car. This may happen when a parent helps a child qualify for a car, or when a borrower with bad credit convinces a friend or relative to cosign the loan. According to the FTC, cosigners pay 75 percent of delinquent cosigned loans.
Can a Co-Borrower on an Auto Loan Get Half the Cars Worth?
Lenders usually use this term when the individual has ownership interest in the loan's collateral. In this case, the co-borrower does get equal ownership rights to the car, and could legally demand half of the vehicle's value if he and the other borrower can't share the ride. If the dispute goes to court, the judge may order one co-borrower to buy the other out, or demand the borrowers to sell the car and split the money. This only applies if both names are on the title.
Can a Co-Borrower File Mortgage Tax?
A co-borrower can claim mortgage interest tax deductions only if he actually paid the interest. He must also live in the home or use it as a second home. The co-borrower is shut out of the mortgage interest tax deduction unless his name appears on the home's deed, even if he paid the interest. Multiple co-borrowers can't deduct the same mortgage interest. If two or more borrowers want the deduction, they must divide the interest among themselves.
Can a Co-Borrower Sue a Co-Borrower?
In most cases, you can't take a co-borrower to court for failure to pay. However, if a court ordered Co-borrower A to make the payments, Co-borrower B can sue if Co-borrower A doesn't pay. The court's decree doesn't remove either co-borrower's legal responsibility to repay the loan, so if Co-borrower A doesn't pay, Co-borrower B's credit will still suffer.
- Pacific Service Credit Union: Frequently Asked Questions -- Vehicle Loans
- Fannie Mae: Selling Guide
- Bankrate: Co-signer, Co-Owner are Different Things
- IRS: Publication 936 -- Home Mortgage Interest Deduction
- Bankrate: Must Ex Pay for 2nd Mortgage if I Sell Home?
- Federal Trade Commission: Co-Signing a Loan