What is the Role of a Co-Signer in a Home Loan?
Sometimes when borrowers do not meet their chosen lender’s set eligibility criteria, the lender asks them to add a co-applicant or a co-signer to their loan application to enhance their eligibility. If someone has asked you to be a co-signer on their Home Loan, sign only if you understand the roles and responsibilities of a co-signer and are comfortable playing that role.
Who Can be a Co-Signer on a Home Loan Application?
A mortgage co-signer is someone who takes on the responsibility of loan repayment in case the borrower defaults on loan payments. A co-signer can be anyone: your parents, siblings, or even close friends who want you to be able to afford the home of your dreams.
Many borrowers and co-signers get confused between the roles of a co-signer and a co-borrower. While a co-borrower is also a part-owner of the property against which the loan has been taken, a co-signer has no ownership interests in the property. Similarly, a co-signer is different from a co-applicant who is liable even when the primary borrower misses a single EMI. Also, only a close family member is eligible to become a co-applicant.
Borrowers must also know that not every lender allows borrowers to enhance their eligibility by adding a co-signer to their application. So, check with your lender if you can add a co-signer to your application.
What Are Your Responsibilities As a Co-Signer?
When you agree to be a co-signer, you essentially agree to pay off the loan in case the borrower is unable to pay EMIs or defaults on the loan. Before signing any loan agreement as a co-signer, understand that this is a huge responsibility. In case of loan default, you will not be responsible for paying EMIs just for a few months but for the entire duration of the loan, until the loan has been fully repaid.
Know that in case of loan default, you won’t be able to back out of paying EMIs on behalf of the primary borrower because of the following reasons:
- If you decide against paying EMIs in case of loan default, it is you who will be required to pay the late fee that lenders charge on delayed payments.
- If you refuse to repay the loan, your credit report will include delinquent payments under your name. This will most certainly make your credit rating go down. This will also make it very difficult for you to get a loan in the future.
*Terms and conditions apply.
