Is There a Way to Remove a Cosigner From a Mortgage Without Refinancing?

Amending A Mortgage

When you take out a mortgage, the lender records a copy of the mortgage agreement at the county courthouse. Lenders can file loan modifications to alter the terms of the original agreement. Commercial lenders often file loan modifications to remove signers from business loans to avoid the cost of refinancing the loan. Lenders are under no obligation to make loan modifications but, in some instances, lenders agree to make changes if all parties agree on the terms of the change.

When you remove a cosigner from a loan, lenders typically check your credit and ask for income verification, such as your last two W2s or tax returns. To remove a cosigner from the loan, the lender must first determine whether you have sufficient income to make the loan payments by yourself. Additionally, you must have a good enough credit score to qualify for the loan in your own right.

Owning a home and being a signer on a mortgage are two different things. The Federal Housing Administration insures loans with cosigners who live in, but do not actually own, homes. Some lenders allow people who neither live in nor own a home to act as cosigners. If you remove a cosigner who has no ownership stake in the home, you assume control of the home and full responsibility to pay the mortgage. If you want to remove someone from both the mortgage and the deed, you must file a quit claim deed with your county. Doing so complicates any loan modification because you are changing the ownership of the home and the actual loan terms. Few lenders will allow you to modify a loan to that extent.

If your lender refuses to remove your cosigner from the loan, both you and the cosigner remain equally responsible for making monthly loan payments until you have repaid the entire balance. If you fall behind on payments, it affects both of your credit scores. If the home falls into foreclosure, the lender can pursue either of you in court for the outstanding debt if a foreclosure sale fails to raise sufficient funds to cover the amount owed.