How Does Co-Borrowing Work?

Co-borrowing is on the rise in L.A. Here’s how it works.

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What is Co-Borrowing?

Today I want to talk about co-borrowing. Faced with extremely high prices in the L.A. market, more and more buyers are purchasing property together, rather than waiting until they can afford something on their own.

This is what’s known as “co-borrowing”.

What is a Co-Borrower?

A co-borrower is an additional borrower on a loan. The second borrower’s credit and income are used to qualify the loan. Unlike with a cosigner, who assumes responsibility of the loan in the case of the borrower’s default but has no actual ownership, a co-borrower is also an owner of the property, and their name will appear on all the loan documents.

Can’t Qualify? Use a Co-Borrower

A co-borrower is often used in a situation where a single borrower can’t qualify for a loan based on their credit history, income, savings, or a combination of all three. Co-borrowers may be co-owners, in the case of couples or roommates, or non-occupants, like family members.

If you and a friend both want to buy real estate but aren’t able to do so individually, consider partnering up.

How Does Co-Buying Work?

First and foremost, you want to be sure you’re buying with a friend or partner you trust and know very well. You don’t want a friend who’s going to flake, or risk a messy breakup with a partner.

Next, you’ll definitely want to be sure you write up a partnership agreement. This should outline the type of title you choose (Tenants in Common or Joint Tenants with Right of Survivorship), how the mortgage payments will be divided up, and how other expenses, like utilities and maintenance of the home, will be taken care of.

Thinking of Co-Buying a Home?

If you’re thinking of buying a home in the LA area and you’re interested in learning more about co-borrowing, we’re here to help. We can answer any questions, and we even have attorneys that can help write up a partnership agreement.

We’re here for you anytime. If you have any questions or any real estate problems that we can solve, don’t hesitate to reach out and give me a call or send me an email. I look forward to hearing from you soon.

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