Definition
A co-mortgagor is a person who signs a mortgage contract jointly with another individual or multiple parties, making them collectively responsible for the repayment of the loan. The involvement of a co-mortgagor can enable the primary borrower to meet the creditworthiness requirements of the lender more easily, and often results in the co-mortgagor receiving a proportional share of ownership in the property attached to the mortgage.
Examples
Example 1: Brown and Jones agree to jointly purchase and inhabit a home. They apply for and receive a mortgage loan together. By doing so, Brown and Jones become co-mortgagors, sharing both the loan repayment obligation and ownership of the property.
Example 2: Sims wishes to help her son purchase a home. Sims provides part of the down payment and signs the mortgage contract as a co-mortgagor. Consequently, she is also liable for the loan alongside her son and might share ownership of the property.
Frequently Asked Questions (FAQs)
What is the difference between a co-mortgagor and a co-signer?
A co-mortgagor shares both the liability of repaying the loan and ownership of the property, while a co-signer only guarantees the loan repayment but typically does not gain ownership interest in the property.
Can a co-mortgagor sell the property without the primary borrower’s consent?
No, a co-mortgagor cannot unilaterally sell the property. Sale decisions typically require the agreement of all parties listed on the mortgage and/or property title.
Does a co-mortgagor need to live in the property?
Not necessarily. Co-mortgagors may live in the property, but it is not a mandatory requirement unless otherwise specified by the lender or the terms of the agreement.
Can a co-mortgagor be removed from the mortgage?
Potentially. Removal of a co-mortgagor usually requires refinancing the mortgage, as the existing loan terms and liabilities may need to be modified.
Co-Borrower
Co-borrowers are individuals who jointly apply for a loan and share equally in both the loan’s obligations and benefits. Unlike a co-signer, co-borrowers often hold joint ownership over the asset financed by the loan.
Co-Signer
A co-signer signs the loan with the primary borrower but does not own the asset attached to the loan. The co-signer is liable for the loan if the primary borrower fails to make payments.
Down Payment
A down payment is an upfront payment made during the purchase of a property, generally required to secure a mortgage. It represents a percentage of the total property value.
Online Resources
References
- “The Mortgage Encyclopedia: The Authoritative Guide to Mortgage Programs, Practices, Prices, and Pitfalls, Second Edition,” Jack Guttentag, 2012.
- “Mortgage Confidential: What You Need to Know That Your Lender Won’t Tell You,” David Reed, 2008.
Suggested Books for Further Studies
- “The Mortgage Professional’s Handbook,” by Whit McGraw
- “The Homeowner’s Guide to Reverse Mortgages: How to Secure Your Financial Future and Enjoy a Great Retirement,” by Cindy Holman
- “The Complete Idiot’s Guide to Real Estate Investing Basics,” by David J. Decker and Alan R. Decker
Real Estate Basics: Co-Mortgagor Fundamentals Quiz
### What does a co-mortgagor share with the primary borrower?
- [ ] Only the responsibility of the down payment
- [x] Both the loan repayment obligation and ownership in the property
- [ ] Only the responsibility of property maintenance
- [ ] Neither the repayment obligation nor ownership in the property
> **Explanation:** A co-mortgagor shares both the loan repayment obligation and ownership interest in the property encumbered by the mortgage.
### Can a co-mortgagor guarantee a loan without having ownership interest in the property?
- [ ] Yes, a co-mortgagor can guarantee the loan without obtaining an ownership interest.
- [x] No, a co-mortgagor usually gains ownership interest along with the primary borrower.
- [ ] Only if specified by the lender.
- [ ] Yes, but only for residential properties.
> **Explanation:** A co-mortgagor usually gains an ownership interest in the property along with the associated loan repayment responsibility.
### If a primary borrower defaults on a loan, who is obligated to make payments?
- [x] Both the primary borrower and the co-mortgagor
- [ ] Only the primary borrower
- [ ] Only the co-mortgagor
- [ ] The lender takes on the responsibility
> **Explanation:** Both the primary borrower and the co-mortgagor become liable for payments if the primary borrower defaults on the loan.
### Is it mandatory for co-mortgagors to reside in the mortgaged property?
- [ ] Yes, all co-mortgagors must reside in the property.
- [ ] Only if specified in the loan agreement.
- [x] No, co-mortgagors are not required to reside in the property unless specified by the lender.
- [ ] Only if the property is for primary residence purposes.
> **Explanation:** Co-mortgagors are not required to reside in the property; this condition is generally not mandatory unless specified by the lender.
### How can a co-mortgagor be removed from a mortgage contract?
- [ ] Through the lender's consent
- [ ] By notification from the primary borrower
- [x] By refinancing the mortgage
- [ ] Through automatic removal after two years
> **Explanation:** Typically, the removal of a co-mortgagor from a mortgage contract requires refinancing of the loan to amend the terms.
### Who assumes the repayment responsibility if a co-mortgagor cannot make payments?
- [x] Both the primary borrower and other co-mortgagor(s)
- [ ] The lender
- [ ] Only the primary borrower
- [ ] Only other secondary borrowers
> **Explanation:** If a co-mortgagor cannot make payments, the primary borrower along with other potential co-mortgagor(s) assume the repayment responsibility.
### What can strengthen a primary borrower's mortgage application?
- [x] Having a co-mortgagor with a strong credit profile
- [ ] Providing a smaller down payment
- [ ] No changes can strengthen the application
- [ ] Requesting a higher loan interest rate
> **Explanation:** Including a co-mortgagor with a strong credit profile in the mortgage application can considerably strengthen the chance of loan approval.
### In a mortgage, who holds the title of the property?
- [ ] Only the primary borrower
- [ ] The lender
- [x] Both the primary borrower and co-mortgagor
- [ ] Local municipality
> **Explanation:** Both the primary borrower and co-mortgagor hold the title of the property under a shared ownership arrangement.
### Are there limits to the number of co-mortgagors on a single mortgage?
- [ ] Yes, only two co-mortgagors are allowed
- [ ] No, unlimited co-mortgagors are allowed
- [x] It depends on the lender's policies and guidelines
- [ ] Yes, up to three co-mortgagors are allowed
> **Explanation:** The number of co-mortgagors permissible on a single mortgage is typically dictated by the lender’s policies and lending guidelines.
### Does having multiple co-mortgagors affect property ownership?
- [x] Yes, it typically means that the ownership is proportionally divided among the co-mortgagor parties.
- [ ] No, ownership remains with the primary borrower.
- [ ] Only if the co-mortgagors demand it
- [ ] Not unless agreed upon in a legal document
> **Explanation:** Having multiple co-mortgagors generally means that ownership in the property is proportionally divided among the co-mortgagor parties.
