Cosigning a loan for a mortgage usually seems like a good idea. By having more than one individual sign for a loan, you are more likely to be approved for the loan because there will be two borrowers whom creditors can seek compensation from. A buyer with poorer credit can be much more likely to be approved of a loan if they co-sign with someone who has good credit. However, these benefits are under the assumption that the borrower you are co-signing for will make payments on time. If he or she does not, it can be difficult to get your name off of the cosigned loan, but still possible.
Refinancing The Loan
If the credit of the debtor with worse credit improves, it is more possible to refinance the mortgage to have the cosigner removed from the loan. This occurs when the lenders have become confident that the remaining debtor will pay back the loan.
Refinancing occurs after a homeowner has owned a home for a length of time in which he or she can afford a new mortgage that will replace the existing loan. If you are going to refinance the loan, you will need to inform the co-signer because you will need is or her cooperation. The borrower will need to meet the requirements for a new mortgage. Borrowers who do not qualify for a normal loan may qualify for a FHA loan if they have a credit score above 580.
Beginning The Process of Refinancing
Once the borrower has met the requirements, you should ask him or her to contact the lender to request a new loan. He or she will then need to request that you not be included on the new loan. Also, now is a good time for the borrower to shop for a new lender because his or her credit will not be hurt within a 14-day window.
Meeting The Requirements
To remove you as a cosigner, the home will often have requirements that it needs to meet. The home will need to be appraised to determine how much the home is worth in comparison to how much is owed on the home.
Having A Cosigner Release Program Written In
If you are entering a lease as a cosigner, ask for a cosigner release program. Under these programs, if the borrower makes a payment on time for a specific number of days, the cosigner can be released from the program.
For more information, talk to a mortgage company.