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Would it help in order to qualify for a loan for my son if I become co-borrower?

Financial Law

Francisco Garcia Ramirez

16th of December 2001

Q. My son is a US citizen working in Barcelona and will be there for a few more years. He wants to buy a house and use me as a co-signer on the mortgage. I am retired and have a small income. Would I be of any help to him as to qualifying for a loan? Also, what is my liability in the event of a default in the mortgage payments? I live in the United States, are my assets at risk if I co-sign his mortgage? Thank you for your advice.

Larry Lane
Long Beach, California

    A. Your assets in the US will not be at risk if you buy the property together with your son. In order to be a co-signer, or co-borrower, you need to purchase the property together with your son, unless you become a guarantor of the repayment, which as a non-resident without any assets in Spain is not possible.

    But you do not need to be a 50% holder of ownership, you can purchase a smaller percentage. This will increase the credit rating and therefore will help your son (and yourself) qualify for the loan. The liability in the event of a default in the mortgage payment is normally restricted to the value of the property.

    However, it could well be the case that in a situation of rapid depreciation of the property, and a subsequent default in the payment, the bank would not be able to recover the full amount of the loan plus interests accrued in an auction, therefore looking elsewhere for recovery. The bank could search for other properties within Spain, but it is unthinkable that they would trace any property abroad. It is highly complicated, expensive and time consuming, as US lawyers would have to be hired to file a suit for recognition and execution of a foreign court ruling, and that is really out of their possibilities.

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