Difference between Co-Owner, Co-Borrower, Co-Applicant, and Co-Signer

Difference between co-owner-, co-signer, co-borrower, co-applicant

You are eligible to apply for a home loan as a co-owner, co-borrower, co-applicant, or co-signer. Understand the difference between them before you choose which of these terms you will use to sign your name on a loan.  It is even more critical to fully comprehend it and make an informed decision because each of these jobs will have various legal and financial responsibilities concerning repaying the loan. All you need to know about these home loan terminologies are listed below.

Co – borrower

Any person who, along with the principal borrower, plays a significant part in taking accountability for the debt’s repayment if the primary borrower fails to do so is referred to as a co-borrower in a housing loan. A co-borrower applies for a loan with the primary borrower, and both parties are legally responsible for repayment.

Co-owner 

A co-owner is a person who, along with the primary borrower, has a legal interest in the property. Most banks, financial institutions, and housing finance firms demand that the co-owners join the primary borrower as co-borrowers. Therefore, along with the primary borrower, all co-owners must be co-applicants on the property loan application; however, not all co-applicants must also be co-owners of the property.

If you are a co-borrower or co-owner and you have to apply for a property loan, then below are a few mentioned points you’d need to consider:

  • They cannot be a minor when applying for a house loan. 
  • Either a married couple or a close relative may be involved.
  • They need a reliable source of money.
  • If the principal borrower’s demise or payment defaults, the co-borrower and co-owner are now liable for the loan’s repayment.

Co-applicant 

Co-applicants are jointly responsible for loan repayment. Banks require all co-owners also to be co-applicants, but the opposite is not required. Therefore, if co-applicants are helping to repay a loan, it is their responsibility to defend their interests. Failure to repay the property loan will revoke the co-ownership applicant’s rights in situations where they are not co-owners. Mr. Anurag Goel (Director at Goel Ganga Developments) adds, “In some circumstances, a co-applicant may be a respondent to a house loan in order to meet the bank’s eligibility requirements”. Only a few designated relationships, such as brother-brother, father-son, mother-son, husband-wife, etc., may be added as co-applicants in a home loan.

Co-signer 

Co-signers typically enter the picture if the primary borrower does not match the requirements for a house loan due to a low credit rating. A good credit score makes it easier to qualify for a loan and reduces interest rates and other beneficial terms and conditions. The co-signer must have a strong credit rating because participation is required due to the primary borrower’s lower credit rating.

The co-signer will be legally equally accountable for the loan repayments if the primary borrower defaults on payments, even though they will not be responsible for the mortgage’s Equated Monthly Instalments (EMI). However, they won’t have any control over the amount of the debt or be eligible for any tax breaks on loan repayments. Additionally, they won’t have any ownership or legal claim to the asset they are co-signing for. Being a co-signer may also make it more challenging to get credit in the future because the loans will appear on their credit report and affect their CIBIL scores.

Five major things one should keep in mind considering the above terms are – : 

Being a co-signer may limit a person’s ability to obtain credit and affect the co-ability signer’s ability to receive future credit.

  • A co-owner is subject to the same legal obligations as the primary borrower.
  • A co-applicant who is not a co-owner is ineligible for mortgage tax advantages.
  • Only when the primary borrower makes, a payment failure does the co-signer become liable for the mortgage.
  • Co-signing mortgage adds to the co-credit signer’s history and lowers their CIBIL score.

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