Co-owner vs Co-borrower in Home Loan

You can apply for a home loan Link in different capacities; you can apply for a loan as a co-owner, co-borrower, co-applicant or a co-signer. It is important to understand the difference between these terms before you decide in what capacity you want to put your name on the home loan-related documents.Depending on what capacity you sign the paper, you have a different role and different legal and financial obligation to fulfil while repaying the home loan . In the write-up let us understand more about co-owner vs co-borrower.

As the name suggests, the co-owner of a home loan gets a legal share in the property along with the main home loan applicant or borrower. Most of the financial institutions in India insist that the co-owner become co-borrower along with the main applicant.Hence, all co-owners are necessarily co-applicants or co-borrowers of the home loan. But all co-applicants may not necessarily be the co-owners of the property.

If you are applying for a home loan as a co-borrower, you must understand the definition of a co-borrower. It refers to an individual who applies for a home loan along with the primary borrower, and plays a critical role in accepting the responsibilities of repayment, if the main applicant fails to repay or defaults on the repayments.As a co-borrower, you bear the legal responsibility of repayment. Also, a co-borrower need not necessarily be the co-owner of the property.Here are a few important things you must know when you become a co-borrower or request someone to be a co-borrower of your home loan:

• The co-borrower cannot be a minor (must be aged more than 18 years)
• The co-borrower must be your spouse or an immediate relative
• If the primary borrower does not repay the home loan, the repayment responsibility falls on the co-borrower.
• The co-borrower must have a regular source of income to be able to repay the debt if the main borrower fails to do so.

Thus, a co-owner and a co-borrower have different legal roles and obligations to fulfil while applying for a home loan. So, make sure that you know your rights and duties well before signing the papers.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.