Some mortgage loans will have a co-signer release option, but most mortgages cannot release a co-signer unless the original borrower refinances the loan. However, a co-signer release option can be requested at the signing.Continue Reading
A co-signer is generally held as responsible for the loan if the original borrower does not make payments. This can ruin the co-signer's credit score if the original borrower is irresponsible or something happens like losing a job. Some co-signers may co-sign with good intentions but without understanding the full brevity of what they are signing. Some mortgage companies include a clause, in the fine print, offering a co-signer release. After the original borrower pays a set amount of payments on time, every time, the mortgage company may allow the co-signer to take their name off the loan. However, the original borrower has to prove to the bank that they are capable and responsible of making those payments.
Many banks will not include this clause, as generally a borrower needing a co-signer is a risky investment. They will not want to risk the chance at any point of not getting their money back by releasing someone with good credit from the mortgage. If this is the case, the only way to get the co-signer off the loan is to have the original borrower refinance the mortgage loan. This includes the bank now reviewing everything for the original borrower, and ensuring they are able to make the same payments. If the original borrower still has bad credit, this may increase the interest on the loan, and some borrowers may not want to refinance because of this.Learn more about Credit & Lending