Mortgage Default: What happens if I am a co-borrower and one of us defaults?

Remember that if you are co-borrowers, you are jointly and severally liable for each other’s debts.

Under standard mortgage documents, borrowers are typically in default 14 days after missing a single payment, even if only one co-borrower is in default. In addition, a bank may impose a penalty interest of at least 5% on top of the existing rate from that point. If it doesn’t look like you are in a position to pay then the bank may serve an order for possession and sale of your property.

Under the PodProperty Co-Ownership Agreement, each co-owner has a power of attorney in their favour so that a co-owner can take over a defaulting party’s share in order to either refinance or sell out. All costs associated with such default come out of the defaulting party’s share.