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Home >> Lending >> Home Mortgage
Setting Up Split Loan
My friend and I want to purchase a cooperative apartment and split it 50/50. We don't have enough money to purchase the apartment, so we want to take out a loan to do so. However each of us only wants to be responsible for one half of the loan. Is there any way that we could do this without setting up an LLC?
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In most cases the lender will produce a loan contract that makes each borrower have joint and several liability for the entire debt. Even when a company borrows money, the owners are often asked to sign as well. Again, each owes the entire debt.
You may have a side agreement with your friend that specifies how assets or liabilities are to be distributed, but the lender wants all their money repaid. If one party passed away, wanted to be bought out, or filed bankruptcy, as examples, the lender wants to rely on the other party. Likewise, they don't want to have to collect half of each payment from each of two borrowers. That doubles their work. The lender can't do anything with the top half, bottom half, left side or right of your townhouse, so we don't believe that an LLC would have any impact here. Likely you and your friend will apply for joint credit.
Published on BankingQuestions.com 3/19/08
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