Legal Considerations for Unmarried Co-Borrowers Paying Off a Housing Loan in the Philippines

This article is for informational purposes only and does not constitute legal advice. Philippine statutes and jurisprudence are cited as of 3 August 2025. Always consult a Philippine-licensed lawyer or qualified tax professional for guidance on your specific facts.

1. Co-Borrowing vs. Co-Ownership

1.1 Who is a “Co-Borrower”?

Banks, Pag-IBIG Fund, and other housing-finance companies treat every signatory to the Promissory Note and Real Estate Mortgage (REM) as solidarily liable (Civil Code arts. 1207–1216). Each borrower can be sued for 100 % of the outstanding debt and the lender may choose to proceed against any or all of them.

1.2 Co-Borrower vs. Co-Maker, Co-Mortgagor, or Guarantor

Co-Borrower / Co-Mortgagor – signs both the Note and the REM; full solidary liability.
Co-Maker – signs only the Note; likewise solidarily liable for the debt but may not be an owner of the collateral.
Guarantor/Surety – binds himself only if the principal debtor fails; the degree of liability depends on the wording of the guaranty.

1.3 Co-Ownership of the House & Lot

Signing as a co-borrower does not automatically confer ownership. Title follows whatever name(s) appear on the Transfer Certificate of Title (TCT) or on the Deed of Sale. If both names are on the TCT, the property is held in co-ownership (Civil Code art. 484) unless a different form of ownership is stipulated.

2. Property Regimes for Unmarried Couples

Relationship Status	Applicable Law	Ownership Presumption
Both parties free to marry (live-in or dating)	Family Code art. 147	Property acquired during the union is co-owned in proportion to proven contributions; if none proven → equal shares
At least one party is married to someone else	Family Code art. 148	Only the actual contributors own; shares are proportional to each party’s contribution
No romantic relationship (e.g., siblings, friends)	Civil Code arts. 484-501	Ordinary co-ownership; shares proportional to contributions, presumed equal absent proof

Tip: Record contributions (cash, in-kind, loan amortizations) and sign a Co-Ownership Agreement before or soon after purchase.

3. Loan Documentation & Registration

Loan/Credit Approval Package – application, income documents, appraisal.
Promissory Note & Disclosure Statement – mandatory under the Truth in Lending Act (RA 3765).
Real Estate Mortgage – notarized; annotated on both the owner’s duplicate and the original TCT at the Registry of Deeds.
Mortgage Redemption Insurance (MRI) – required by most lenders; pays the outstanding principal if a borrower dies during the term.
Fire/All-Risk Insurance – protects the collateral.

Only after annotation does the mortgage bind third parties (Property Registration Decree, PD 1529).

4. Paying the Loan: Allocation, Reimbursement & Release

4.1 Allocation of Payments

Unless the borrowers have a separate written agreement, each peso paid is presumed common. To rebut, keep receipts noting who paid which installment.

4.2 Right of Reimbursement

A co-owner who pays more than his share may demand reimbursement plus legal interest (6 % p.a.) from the others (Civil Code arts. 488, 1250).

4.3 Early Settlement & Pre-termination

Under Bangko Sentral ng Pilipinas (BSP) Circular 1048, pre-termination fees on housing loans are allowable only if disclosed in writing up-front.

4.4 Release/Substitution of a Co-Borrower

Banks usually require:

Updated appraisal and credit underwriting;
Assumption of Mortgage agreement;
Payment of release fees (₱3 000–₱20 000 typical);
Submission of a notarized Quitclaim by the exiting borrower.

5. Taxes, Fees & Government Charges

Stage	Tax / Fee	Legal Basis	Who Pays?
Loan execution	Documentary Stamp Tax (DST) on the Note (₱1 on each ₱200 of the amount) and on the REM (₱40 for every ₱5 000 of the loan secured)	NIRC secs. 179-195	Borrowers
Title transfer (if property sold between co-owners)	Capital Gains Tax (6 %), DST on sale (₱15/₱1 000), Transfer Tax (0.25-0.75 %)	NIRC; Local Gov’t Code	Seller and buyer as agreed
MRI premium	VAT-exempt (life insurance)	NIRC sec. 109(V)	Borrowers
Estate of deceased co-borrower	Estate Tax (graduated 0-15 % on net estate > ₱5 M)	NIRC sec. 84	Heirs (MRI proceeds first applied to loan)

6. Risks on Separation or Default

6.1 Break-Ups & Partition

Voluntary partition: Execute a Deed of Assignment or Extrajudicial Settlement, pay transfer taxes, and secure a new TCT.
Court-ordered partition: Any co-owner may sue under Rule 69 ROC; the court may order sale at public auction if the property is indivisible.

6.2 Foreclosure

Judicial foreclosure (Rule 68 ROC) or extrajudicial foreclosure under Act 3135 (if REM includes a power of sale).
Right of equity of redemption (judicial) or right of redemption within one year from auction date (extrajudicial), except when covering a principal residence valued up to ₱2 M, where special rules under BSP & HLURB apply.

6.3 Credit Record

Default by either co-borrower affects both credit scores with the Credit Information Corporation (CIC), impeding future borrowing.

7. Death, Incapacity & Estate Settlement

Claim MRI – submit death certificate within 30 days; insurer pays lender directly.
Estate Proceedings – heirs may inherit the equity subject to the mortgage (Civil Code art. 774).
Transfer & Estate Taxes – file BIR Form 1801 within one year; obtain Certificate Authorizing Registration (CAR) before retitling.
Right of Survivorship? – Unlike joint bank accounts, TCTs do not have survivorship clauses; the deceased’s undivided share passes to his heirs, not automatically to the surviving co-borrower.

8. Special Programs & Alternatives

Program	Key Take-Aways for Unmarried Co-Borrowers
Pag-IBIG Fund End-User Home Financing	Allows up to three Pag-IBIG members to pool income; each must pass capacity-to-pay & membership savings requirements.
Bank Joint Home Loans	Most private banks limit co-borrowers to immediate family members; unrelated parties may be asked to put both names on title and provide co-ownership agreement.
Rent-to-Own & Contract-to-Sell	Until the Deed of Absolute Sale is signed and the TCT transferred, the developer retains ownership; the parties’ interests are contractual, not proprietary.

9. Consumer Protection & Privacy

Truth in Lending Act (RA 3765) – lenders must disclose annualized percentage rate, all charges, and penalties in a single, clear document.
Consumer Act (RA 7394) & BSP Consumer Protection Framework – prohibit unfair collection and misleading advertising.
Data Privacy Act (RA 10173) – borrowers’ personal and financial information must be processed with appropriate security measures.

10. Best-Practice Checklist

□ Draft a Co-Ownership Agreement before the loan drawdown, stipulating shares, payment schedule, succession, and exit mechanism.
□ Keep a Payment Ledger (spreadsheet, shared e-wallet records, or bank ledger) showing who paid each installment.
□ Maintain Separate Life Insurance equal to each party’s unpaid share, even if MRI exists.
□ Plan an Exit Strategy (buy-out, assumption of mortgage, or sale) and align it with the loan’s lock-in period.
□ Update Wills (Art. 804, Civil Code) to avoid intestacy disputes.
□ Monitor Bank Notices jointly; require the lender to send copies to both parties.

Conclusion

Entering a housing loan as unmarried co-borrowers intertwines solidary debt liability with a civil-law co-ownership of the property. Philippine law offers mechanisms to protect each party’s financial and proprietary interests, but these safeguards work only when understood before problems arise. Detailed documentation, transparent contribution tracking, and proactive estate planning are the cornerstone strategies for avoiding costly litigation or foreclosure down the line.

Need tailored guidance? Engage a real-estate lawyer or tax specialist to review your draft agreements, the bank’s loan terms, and your long-term succession plans.