In the Philippine real estate market, the inclusion of a co-borrower is a common practice, often necessitated by the stringent income requirements of lending institutions or the high cost of property. However, when the underlying mortgage is subject to a transfer—whether through the sale of the property, the assignment of credits, or a loan buyout—the legal position of the co-borrower becomes a focal point of rights and obligations.

In the Philippines, the relationship between co-borrowers is primarily governed by the Civil Code of the Philippines, specifically the provisions on "Obligations and Contracts," and the terms of the Mortgage Contract itself.

1. Nature of the Co-Borrower’s Liability

To understand their rights, one must first understand their burden. In most Philippine bank forms and mortgage contracts, co-borrowers are bound solidarily.

Under Article 1207 of the Civil Code, solidary liability means that the creditor (the bank or mortgagee) can demand the fulfillment of the entire obligation from any one of the debtors.

The Right of Parity: A co-borrower is not a mere "witness"; they have the same legal standing as the primary borrower.
The Right to Information: Because their credit standing and assets are at risk, they have a right to be informed of any changes to the loan’s status.

2. Rights During the Transfer of the Mortgage

A "transfer" can occur in two ways: the bank sells its credit to another entity (Assignment of Credit), or the borrower sells the property to a third party who "assumes" the mortgage (Assumption of Mortgage).

A. Right to Consent (Assumption of Mortgage)

Under Article 1293 of the Civil Code, a change in the person of the debtor (Novation) cannot be done without the consent of the creditor. Conversely, a co-borrower’s liability cannot be transferred or extinguished by the primary borrower alone.

If the primary borrower sells the property to a third party, the co-borrower must consent to the transfer if they wish to be released from the obligation.
Without an express release from the bank and the co-borrower’s participation in the new contract, the original co-borrower remains solidarily liable for the debt, even if they no longer "own" a share in the house.

B. Right to Notice (Assignment of Credit)

If the bank transfers the mortgage to another financial institution, the co-borrower has the right to be notified. While the bank generally does not need the borrower's consent to sell its credit, the transfer is only effective against the borrowers once they are notified.

3. The Right of Reimbursement and Subrogation

If the mortgage is transferred or if the loan becomes due, and the co-borrower is forced to pay the full amount to protect the property or their credit score, they possess the Right of Reimbursement.

Article 1217: "He who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest for the payment already made."

If a co-borrower pays the entire debt during a transfer or foreclosure threat:

Reimbursement: They can legally demand the primary borrower pay back their share.
Subrogation: They step into the shoes of the bank. They now hold the rights of a creditor against the other co-borrower.

4. Rights in the Event of Foreclosure

If the mortgage transfer fails or the loan is defaulted upon, the co-borrower has specific rights under Act No. 3135 (The Extra-Judicial Foreclosure Act):

Right to Notice of Sale: They must be notified of the time and place of the auction sale.
Right of Redemption: Within one year from the date of the registration of the certificate of sale, the co-borrower has the legal right to redeem the property by paying the purchase price plus interest.
Right to Surplus: If the property is sold for more than the outstanding debt, the co-borrower has a right to a proportionate share of the surplus proceeds.

5. Protection Against Material Alterations

A co-borrower has the right to be protected against Novation without consent. If the primary borrower and the bank (or the new transferee) decide to increase the interest rate, extend the period of payment, or increase the principal amount without the co-borrower’s written agreement, the co-borrower may argue that their liability is extinguished or limited to the original terms.

Summary Table of Co-Borrower Rights

Right	Description
Consent to Novation	The right to refuse being held liable for a "new" contract they didn't sign.
Notice	The right to be informed of assignments of credit or foreclosure proceedings.
Redemption	The right to buy back the property within one year after a foreclosure sale.
Reimbursement	The right to recover payments made on behalf of the primary borrower.
Surplus	The right to a share of excess funds after a foreclosure auction.