Banks have increased requirements for obtaining a loan to buy an apartment. Increasingly, they began to ask to attract a co-borrower
< /p>
After the announcement of partial mobilization in September 2022, the risks for banks increased, and they increased the requirements for obtaining a mortgage for borrowers: they began to limit the loan amount and raise rates, including on already approved applications. To maintain the original conditions and confirm the financial reliability, it is now often asked to attract a co-borrower or guarantor. When making a new application, this is a way to insure if there is a fear that the bank will not approve the loan, or there is no confidence in one's financial capabilities to service the loan. Experts of the Elitnoye.ru portal, based on data from the Metrium company, talk about why a co-borrower is needed for a mortgage, and who can become one.
Why do you need a co-borrower
For the bank, the co-borrower is simply the second borrower, who, just like the first, is responsible for all loan obligations. If the mortgage is for more than one person, the borrower may sometimes be referred to as the title borrower and the co-borrower as a solidary borrower. A co-borrower is brought in to increase the chances of getting a mortgage approved or to arrange it on more favorable terms. For example, if there are “black” pages in the credit history, then the bank can make a surcharge and increase the size of the first installment. When applying for a loan not only for the borrower, but also for a co-borrower with a good credit rating and income, the percentage is calculated based on the reliability of both clients. Also, a co-borrower is needed to get a large amount with a good credit history, but low income. Then the bank will issue a loan taking into account the solvency of the co-borrower.
What is the difference between a co-borrower and a guarantor
The obligations of a co-borrower and a guarantor are similar. If the borrower is insolvent, they must repay the debt in his place. The differences are in the details. The co-borrower has the same obligations and rights as the borrower. He equally signs each clause of the contract and can influence the terms at the time of repayment. If the title borrower violates the payment schedule even for a few days, the bank will contact the co-borrower and fully transfer responsibility to him. The level of discipline in repayment of the loan will also be reflected in the credit history of the second borrower. Also, in almost all banks, a co-borrower is issued a joint or shared ownership right.
At the same time, the guarantor only guarantees the bank that the borrower will service the mortgage on schedule and repay the debt on time. Banks assess the solvency of the guarantor not so scrupulously, and data on discipline will get into the credit history only in the situation if the bank makes claims for repayment of the debt to the guarantor. The Bank concludes a separate agreement with the guarantor. It may establish joint and several (equal) or subsidiary liability. With the latter option, the guarantor is responsible to the bank for the borrower only as a last resort and after the trial. For example, if the main debtor is late in payments for several weeks or months. If the borrower has both a guarantor and a co-borrower, the bank will first turn to the co-borrower. Moreover, the guarantor has the right to sue the borrower with a regression claim – a request to reimburse the funds paid to the bank, including penalties, interest and legal costs.
Who can become a co-borrower
There are no restrictions on who can become a co-borrower. This may be a close relative of the borrower, friend, colleague. The main thing is the consent of the person, and that he resembled the requirements of the bank. It should be borne in mind that in some banks, solidary borrowers are attracted automatically. Usually it becomes the second spouse. An exception is if a marriage contract has been concluded with the spouse with prescribed requirements for the division of loan obligations. Other banks will require notarial consent to exclude a husband or wife from the transaction. In addition, a family member who owns a certificate for the purchase of real estate under one of the regional or federal programs becomes a solidary borrower. By the way, the co-borrower does not have to be only one. Each bank regulates their number independently. Most often, it is allowed to attract up to three or up to four solidary borrowers.
Requirements for a co-borrower
When applying for a loan, the bank considers the co-borrower according to the same parameters and as closely as the main borrower. The credit history, the debt load indicator, and the salary level of the involved co-borrower are also taken into account. Some banks may refuse to provide a mortgage if the second borrower does not have Russian citizenship, as well as temporary or permanent registration in the country.
Co-borrower rights
Co-borrowers have broad rights: they can receive information about payments, delinquencies and other mortgage account data, apply for loan refinancing, repay it ahead of schedule, and also make a tax deduction. The co-borrower may be the owner of the acquired property or the owner of the share, if it is specified in the contract. Also, the contract or supplementary agreement indicates exactly how the responsibility of the borrower and co-borrower is divided. Although the account for the payment of monthly payments and the schedule are the same, but sometimes the title borrower and co-borrower can legally fix the amount of their payments. For example, in equal shares or in some percentage.
Changing the composition of borrowers
Solidary borrowers are liable until the mortgage obligations are fully discharged. But you can change the composition of borrowers. First, for good reasons, the co-borrower may withdraw his status. For example, if you lose income or change your place of residence. Also, most often, at the dissolution of a marriage, the spouses agree on the transfer of rights to real estate and obligations under the loan to one of them. To remove the status, you need to send an application and file a lawsuit.
Secondly, you can replace the co-borrower. If the title borrower does not have the financial ability to service the loan after the second borrower has left, the bank will most likely require that another be found. Thirdly, the status of the title borrower can be transferred to a co-borrower. When one of the spouses moves to work in another country, the ranks are reversed, and the spouse who remains in Russia becomes the borrower. It is more convenient to pay this way. In any of the three cases, the bank may request documents for the remaining/new owner and consider the application as a new application to meet the requirements for the level of credit load, income, etc.
