3. CO-BORROWING

This is a financing alternative for borrowers who do not meet eligibility requirements and who therefore do not qualify for a mortgage. In such cases, another person, or co-borrower can increase the likelihood of qualifying for the mortgage or even qualifying for a larger mortgage. It is recommended that co-borrowers be a relative or other person close to the borrower.

Co-borrowing simply combines the incomes of both applicants for consideration of ability to pay installments in the required amount such that both become debtors. Each co- borrower is responsible to make mortgage payments and pay off the total loan within the specified period. Co-borrowing usually involves a main borrower and co-borrower depending on the requirement of the bank, but in most cases, it involves not more than 1 – 2 additional borrowers.

Generally, the eligibility of a co-borrower is not different from the general borrower that is, they must have a stable job and income, be of legal age, not have large outstanding debt and not have a bad financial history (e.g. bad credit bureau rating). Some banks require that a co-borrower be close to the borrower for example, a parent, husband or wife or true brother and sister as the bank must ensure that the co-borrower take equal responsibility for the mortgage.

Co-borrowing procedures do not differ from general borrowing. The mortgage will be in the names of both as debtors and will use the proof of income from both the borrower and co-borrower for income qualification.

The amount of a mortgage in a co-borrowing scenario will be based on the eligibility of the two applicants’ request. For example, if the applicant is seeking a 2.1 million baht mortgage, if the borrower has a 30,000 baht monthly salary, the bank would approve a mortgage of about 50 times income. In this case, the applicant would qualify for a 1.5 million baht mortgage which would not be sufficient.

However, with a co-borrower who also has a monthly income of 30,000 baht, the applicants would qualify for a 3 million baht mortgage.

Both borrowers will have the right in the debt and the property that both pay on half, until the installment is paid off and transfer the property to whomever or possess together.

Normal mortgage terms do not exceed 30 years with borrowers not being over 65. In the case of co borrowing, the younger mortgage applicant’s age is taken for this criterion.

Co-borrowing has obvious advantages for example, applicants may qualify for more money than they would individually and the debt is a joint responsibility but it also has risks. For instance, if one of the co-borrowers ignores responsibility for the debt, the other person holding the mortgage will have to assume it. It is therefore important to choose a co-borrower one can trust.

Co-borrowing differs from a credit guarantee in that the credit guarantee cannot increase the amount of the mortgage one qualifies for. But in terms of responsibility for the debt, if a main borrower defaults on the mortgage, a co-borrower and guarantor are equally responsible.