Definition
Co-Borrower
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When 2 or more people have signed up as borrowers of a housing loan, they are jointly responsible to repay it and become co-borrowers.
This happens commonly in Singapore when both the husband and wife are income earners in the household and need to combine their incomes to be able to borrower the loan quantum they are requesting from the bank.
It is also a requirement of HDB for families that purchases BTO flats including ECs.
However, coborrower is not limit to married couples.
Sibling, relatives, friends, investors, etc, can also become co-borrowers to a loan.
They do this usually for:
- Ownership; and
- To boost qualifying income
- To boost combined credit score
When co-borrowers are involved in a home loan application, both borrowers’ credit scores are averaged out to generate a combined credit score.
This can help a bank determine whether a loan should be improved or not.
However, problems can arise when co-borrowers split.
One party might then need to free up his or her name in order to qualify for a larger loan to value for another property loan. And the lender of the current loan might not be prepared to release one party as a co-borrower. These situations can be a huge headache.
So do address these problems beforehand when getting into co-borrowing.
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