How to get a cosigner off your mortgage

As a co-signer, you are guaranteeing payment in case the primary borrower defaults. The lender will report the account as a derogatory item on your credit reports if the primary borrower fails to pay. The lender will not remove you from the loan because your income, credit, and other factors were the basis for providing the loan and you signed loan documents that hold you liable in the event of a default.

Removing a Co-signer

There are three ways to have your name removed from the second mortgage. The first method is for her to refinance the mortgage to obtain an entirely new mortgage loan to pay off the existing second mortgage. The second method requires her to sell the home, assuming there will be sufficient proceeds from the sale, so that the second mortgage is paid off and you are no longer responsible for the loan. Finally, you can file for bankruptcy.

Risks of being a Co-signer

Because of the risks associated with being a cosignatory on a loan, lease, or other debt, I generally discourage the practice. I have seen far too many people who have cosigned loans for people whom they trusted end up in serious financial hardships when their friend or loved one failed to pay the debt as promised.

When considering cosigning for any debt, you should assume that you will be required to pay the debt yourself, and only agree to cosign if you know that you could pay the debt in full tomorrow without causing you or any financial hardship. If you do not have sufficient savings to pay off the debt for which you are cosigning, then it is probably imprudent for you to make such a potentially costly commitment. (See Will Co-signing On a Loan Hurt My Credit Score? for more about co-signing contracts.).

So you cosigned a mortgage for someone, and now you want off of it. Whether it’s because the other person isn’t making up their share of the payments, or because they’re now in a position to handle a mortgage on their own, you want your name off the mortgage contract. But it was a huge process just to get your name on there in the first place, how are you supposed to ever get it off? Can a cosigner be removed from a mortgage loan? The answer is certainly, yes!

In order to get your name, or your co-signers name, off a mortgage, home refinancing needs to be done so that a whole new mortgage can take the existing mortgage’s place.

A name can’t simply be stroked off a mortgage document without a new agreement taking place; and to do this, refinancing or remortgaging will have to take place. But don’t worry, it’s not as hard as you’d think with the right tools.

Removing a co-signer from a mortgage

If the person taking on the mortgage by themselves is going to be staying with the same lender, refinancing could be an option. If a different lender will be used, remortgaging will need to happen, in which a whole new loan will need to be obtained to pay off the existing mortgage. At that time, the new lender would then take over the loan and it would work as any other type of mortgage between the lender and the borrower.

However, it’s also not only a simple matter of money changing hands from one lender to another. Formal documents need to changed. The borrower whose name will be staying on the mortgage will need to qualify on their own in order to be approved for a mortgage – whether they’re planning on staying with the same lender or not.

This means that they may need to have a down payment, and they most likely will need to have good credit. However, depending on how long they have already owned the home, and how much equity is in the home, they may be able to use that equity in order to help them qualify for the loan.

Putting the name of a co-signer on a mortgage isn’t really all that difficult; but taking it off can be. Refinancing and remortgaging can both become fairly complex processes that include a number of fees – including a prepayment fee if you need to break a mortgage in order to do it.

When you need to walk through the process of removing a cosigner from a mortgage, speak to a qualified mortgage broker who can help; and who can find you a new lender with the best mortgage package, if needed.

What is a co-signer’s responsibility?

It’s important to keep in mind that, as a co-signer, you are not responsible for half of the mortgage. Rather, both borrowers who are listed as co-signers are responsible for the entirety of the mortgage loan. If the individual who you have co-signed with fails to pay his or her share for financial reasons or other extenuating circumstances, you are on the hook for 100 percent of the remaining loan. This is not an insignificant detail, and it’s an important part of why lenders are so hesitant to remove a co-signer from a mortgage.

A mortgage with two cosigners provides lenders with additional security. Because there are two people who are responsible for the loan, the bank has more opportunities to collect on the balance of the debt if needed. Thus, by removing a name off a mortgage, the lender assumes a greater level of risk.

Lenders can be so hesitant to remove a cosigner from a mortgage that you might not be able to have a name removed at all—even in the case of a divorce or separation. In fact, lenders are still able to collect from both loan applicants even if there is an agreement stipulating that one partner is solely responsible for the debt. This is especially important to keep in mind if you think your current or former partner may not be able to make payments on the loan.

To ensure that you are not tied to a mortgage that you don’t want, it’s important to take the steps necessary to get your name off the mortgage as quickly as you can. Speak with a professional mortgage professional who can guide you through the process.

Can a cosigner be removed?

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When can a cosigner be removed from a loan?