A co-borrower is basically your mortgage sidekick—someone who applies for a loan with you and shares the responsibility of paying it back. This could be your spouse, partner, family member, or even a close friend. So, should you get one? Let’s find out.
Why you might want a co-borrower
- More cash flow: pooling incomes means you can qualify for a bigger loan, giving you a better shot at snagging the home you actually want.
- Better credit score: if your co-borrower has a solid credit score, it can boost your overall creditworthiness and score you a lower interest rate.
- Teamwork makes the dream work: splitting the financial load means less stress when the bills start piling up.
Reasons a co-borrower could hold you back
- Credit score matters: if your co-borrower has a shaky credit history, it could pull down your chances too.
- You’re in this together: if one of you misses payments, both of you are on the hook—that’s a real test of teamwork.
- Future financial goals: consider how adding a co-borrower might affect other financial plans down the road.
Here’s a table showing how a co-borrower’s income can increase your home-buying power across different income scenarios
We’ve assumed a debt-to-income (DTI) ratio of 36% and a mortgage interest rate of around 6%, with approximately 28% of total income allocated to housing expenses (covering principal, interest, taxes, and insurance). Home price estimates are based on a 30-year mortgage and can vary depending on down payment and location, but this gives you a helpful ballpark figure!
| Scenario | Borrower income | Co-borrower income | Total income | Estimated monthly payment | Home price estimate |
| Solo borrower (base scenario) | $85,000 | N/A | $85,000 | ~$1,980 | ~$297,500 |
| With co-borrower (scenario 1) | $85,000 | $150,000 | $235,000 | ~$5,480 | ~$822,500 |
| Scenario 2 | $85,000 | $100,000 | $185,000 | ~$4,317 | ~$647,500 |
| Scenario 3 | $85,000 | $75,000 | $160,000 | ~$3,733 | ~$560,000 |
| Scenario 4 | $85,000 | $250,000 | $335,000 | ~$7,817 | ~$1,172,500 |
| Scenario 5 | $85,000 | $400,000 | $485,000 | ~$11,317 | ~$1,697,500 |
| Scenario 6 | $85,000 | $50,000 | $135,000 | ~$3,150 | ~$472,500 |
Is having a co-borrower common?
Absolutely! having a co-borrower is pretty common in the home-buying world.
- First-time buyers: a lot of first-timers team up with family or friends to make homeownership more accessible. pooling resources helps them qualify for a better loan.
- Couples and partners: spouses or partners often apply together, combining incomes and credit scores to make getting a mortgage easier.
- Investment properties: investors frequently bring in co-borrowers to share financial responsibility and boost purchasing power for rental properties.
- Roommates or friends: in competitive markets, friends or roommates sometimes join forces to buy a home, especially when prices are high.
Can one co borrower buy the other out?
For sure. Here’s what would need to happen.
- Determine property value: first, figure out how much the property is worth. you might want to get a professional appraisal to avoid any disputes over the price.
- Agree on terms: both co-borrowers need to agree on the buyout terms, including how much the buying co-borrower will pay and how any existing equity will be handled.
- Refinance the mortgage: the co-borrower who wants to take full ownership will usually need to refinance the mortgage in their name only. this means getting a new loan that pays off the existing mortgage, freeing the other co-borrower from any financial obligation.
- Transfer the title: after refinancing, the property title needs to be updated to reflect the sole owner. this typically involves filing a new deed with the county recorder’s office.
- Legal and financial considerations: it’s a good idea for both parties to consult with a real estate attorney or financial advisor to ensure everything is done legally and that both parties understand their rights and responsibilities.
When it comes to splitting up as co-borrowers, here are several more options, in addition to one partner buying out the other
Refinancing: One of you can refinance the mortgage, essentially getting a new loan just in your name. This pays off the original mortgage and frees the other person from any financial ties. It’s a common move for keeping the house in one person’s hands.
Selling the property: If you both want out, selling might be the simplest route. You can cash in on the property’s value, split the profits, and move on without any lingering obligations. It’s a clean break!
Deed transfer: If one of you wants to stick around and keep the property, you can buy out the other’s share. This involves a legal deed transfer to officially change ownership, and the buying co-borrower usually pays the selling co-borrower for their stake in the property.
Loan assumption: In some cases, the lender might let one co-borrower assume the mortgage, taking over the loan while the other steps back. It can be a smoother process but does require lender approval.
Partition action: If things get sticky and you can’t agree, one of you might need to file a partition action in court. This legal move forces the sale of the property or splits it up, but be warned—it can be a lengthy and pricey process.
Modification of ownership agreement: You can also create a new legal agreement to change your ownership stakes. This could mean adjusting percentages or laying out terms for future buyouts.
Mediation or arbitration: If discussions turn into a tug-of-war, consider bringing in a mediator or arbitrator. A neutral third party can help you work through the issues and find a solution that works for both sides.
If you’re ready to start your journey to homeownership, get pre approved with Tomo Mortgage today.