Can you refinance a mortgage to remove a cosigner

When an applicant falls short of qualifying for a mortgage on their own, they may use a cosigner, commonly referred to as a co-borrower, to make them more creditworthy. Having someone with good credit and income cosign mortgage documents increases the chances of being approved, and may even result in better loan terms. Once a home loan is finalized, removing a co-borrower from a mortgage loan generally cannot happen, nor can a name be added, without refinancing the loan entirely.

TL;DR (Too Long; Didn't Read)

Refinancing is typically the only valid process for removing a co-borrower from a mortgage loan and adding another cosigner or co-borrower. Consider the cost and consequences of refinancing before asking someone to cosign mortgage documents.

Cosign Mortgage Applications

To qualify for a mortgage loan, borrowers must meet certain requirements determined by the lender. Generally these requirements include good credit scores and stable income. The lender runs a credit check on the borrowers and then usually asks the borrowers to submit some financial documents to verify their income. The lender wants to ensure the borrowers earn enough to afford the monthly loan payments. A cosigner can help your chances of getting a loan, or receiving better loan terms, when the cosigner has as good or better credit than you have and a steady and verifiable income. A cosigner with bad credit or no income is likely to hurt your application or loan terms.

Cosigners vs. Co-Borrowers

Ideally, your cosigner should be in a better financial situation than you. The lender will review the cosigner's credentials and then make a final decision. The cosigner holds a financial responsibility to repay the loan, but won't be on the deed to the property. Only co-borrowers, which are essentially second borrowers on the loan, go on title. The cosigner retains this responsibility until the loan is paid in full. If the primary borrower defaults on loan payments, the lender can try to collect the past-due amount from the cosigner. The home loan will also appear on the cosigner's credit report for the total loan amount.

Reasons for Removing Name From Mortgage

In order to add or remove a cosigner or co-borrower from your home loan, you must refinance. The refinancing process consists of applying for a new loan. The new loan is used to pay off the original home loan. It's common for borrowers to refinance their mortgages to obtain better interest rates, extend the loan's term or reduce monthly payments. Because a refinanced loan is a completely new loan, a cosigner can be removed and a new cosigner or co-borrower can be added. Once the refinance is complete, any financial responsibility towards the old loan is considered fulfilled or satisfied. Removing your ex spouse from a mortgage, or removing an unneeded co-borrower from a mortgage loan are common reasons for refinancing.

Considerations for Cosigners

To cosign mortgage documents for someone is a serious obligation. Regardless of how well you know the borrowers or how much you trust them, you might end up paying for their default down the road. Cosigners should take a pro-active approach to ensure that the loan is being paid on time each month. Missed payments will negatively affect the cosigner's credit score as well as the borrower's. The lender might be willing to work with the cosigner by providing notification of any missed payments. However, there are cases where people simply need a few years to build up their credit score. After that, they can refinance the loan and remove the cosigner.

At a Glance: There are a number of options for removing a cosigner from a loan, including paying off the debt, releasing the consigner, and refinancing the loan to have the cosigner removed.

Disclosure: Stilt is a lending company. Nonetheless, we are committed to recommending the best loan products to our readers when their needs are outside Stilt’s loan offerings.

Starting a credit history can be tough. Even tougher if you are an international student studying in the U.S. on a visa. One of the easier ways to get loan options is to get a cosigned loan. Cosigners provide their creditworthiness for your credit applications. They help you to get better loan options. But what can you do if you want to get a cosigner removed from a loan?

There are a few ways to remove a cosigner from a loan. We’ll show you these options and also look at how to refinance car loans to remove cosigners. It’s much easier than you’d think. This is how you can do it.

• Is it Possible to Remove a Cosigner from an Auto Loan?
• 3 Simple Steps to Applying for a Refinancing Loan
• Benefits of Removing a Cosigner from an Auto Loan
• Read More
• Conclusion

Is it Possible to Remove a Cosigner from an Auto Loan?

Cosigned loans help the beneficiary tremendously. They get cheaper loan offers, better interest rates, and possibly get access to loans they won’t qualify for without the cosigner’s credit history.

Whether cosigned student loans or cosigned auto loans, is it possible to remove a cosigner? Yes, it is and there are a few ways to get it done.

Ways to remove a cosigner from an auto loan:

Pay Off the Debt

A loan that has been repaid will automatically remove a cosigner from it. This is the simplest of ways to do it, but it may take time to repay an auto loan. You could repay it all at once or you’d have to settle it in monthly repayments. But this may not settle the debt fast enough to get the cosigner released early enough.

Release the Cosigner

Some lenders will allow the cosigner to be released from the credit agreement. This helps the cosigner remove the debt from their name. All liability shifts to the principal borrower. This sounds simple, but the principal borrower must comply with a series of eligibility criteria before the lender will allow it. The borrower must prove they possess the ability to settle the debt on their own without any assistance from the cosigner. Then the lender may release the cosigner from the debt.

Sell the Car to Pay Off the Loan

Most auto loans require a deposit. The deposit can have a positive effect on the solvency of the loan. The value of the car can be higher than the outstanding balance of the debt. You can sell the vehicle and use the proceeds to repay the loan. Then the cosigner will be released from the debt since it has been repaid.

Refinance the Car Loan to Remove the Cosigner

The principal borrower can refinance the auto loan in their own name to remove the cosigner. The borrower gets a new loan agreement possibly from a different lender. The old loan agreement closes and the debt is removed from the cosigner’s name. Refinance your car loan in your own name and your cosigner will automatically be removed.

There could be more ways to remove a cosigner from a loan, but these are the more prominent options. All of these options may not be available to you since it may require you to comply with eligibility criteria beyond your reach. Refinance a car loan to remove the cosigner could be your best option. Let’s see how it works.

3 Simple Steps to Applying for a Refinancing Loan

If you are considering applying for a personal loan for auto loan refinancing, just follow these 3 simple steps.

Apply

Apply online for the loan amount you need. Submit the required documentation and provide your best possible application. Stronger applications get better loan offers.

Accept

If your application meets the eligibility criteria, the lender will contact you with regard to your application. Provide any additional information if required. Soon you’ll have your loan offer. Some lenders send a promissory note with your loan offer. Sign and return that note if you wish to accept the loan offer.

Repay

The loan then gets disbursed into your U.S. bank account within a reasonable number of days (some lenders will be as quick as 2-3 business days). Now you need to set up your repayment method. You can choose an autopay method online to help you pay on time every month.

Personal Loans

for Visa Holders!

Loans for up to $35,000. No cosigner required. No prepayment penalty.

Benefits of Removing a Cosigner from an Auto Loan

Why would you want to remove a cosigner from a loan? Are there benefits to removing a cosigner? Let’s look at some reasons why you want to refinance a car loan to remove a cosigner. You can also consider international student loans with no cosigner.

Cosigner No Longer Responsible

Perhaps the cosigner is a close friend or relative of yours. The fact that they are your cosigner may be straining your relationship with them. Refinance and get them removed from your car loan. Your relationship will take less strain when you remove the financial pressure that surrounds it. You could even release a cosigner from an international student loan.

Some cosigners ask to be removed from a loan. You can follow the same procedure when your cosigner asks to be removed from your loan. Use the tips provided here to find the best way to get it done.

Cosigner’s Credit Score No Longer Affected

A cosigner is also part of the loan. Your cosigner’s credit score is affected by the loan. Their credit score will also decrease if you miss payments. But they won’t be affected by your payment habits once you remove them from your loan. Remove them from your car loan to keep a separation between your credit scores.

Possible Better Interest Rate for You

You’ve had some time to build your credit history. Your credit score is much stronger since you took out the car loan. You can now apply for loans in your own name and get better interest rates. The main goal of refinancing is to get cheaper interest rates. Refinance your auto loan and you could possibly get lower interest rates.

Possible Lower Monthly Payments for You

Lower interest rates cheapen your monthly repayments. The interest on your loan accrues much slower. This helps to lower the monthly payments required by your loan. It will not only ease your budgeting efforts, but it may also help you repay your loan faster. Repay your loan faster than what is required by your lender to improve your credit score even more.

Read More

• How To Refinance Your Indian Student Loan in the U.S.
• How to Refinance Your Payday Loan

Conclusion

A cosigner can help you get car loans you would never qualify for on your own. It helps you get the loans you need to succeed in life. It also helps you start your credit history. Cosigned loans can get cheaper interest rates than what you would qualify for on your own.

But after a few years of faithful repayments, your situation changes. Perhaps your cosigner no longer wants to be part of your car loan. Maybe you want to remove your cosigner from your car loan for various reasons. There are many ways to do this, as mentioned above. One of the best ways to do it is to refinance your car loan to remove a cosigner.

You can get much better interest rates, lower monthly payments, and possibly repay your loan much faster if you refinance it. Look for lenders who are willing to help you and apply. The best loan offers will most likely be the cheapest. Get your car loan refinanced today.

Need a Loan? Get One in 3 Simple Steps

If you are considering applying for a personal loan, just follow these 3 simple steps.

Apply

Apply online for the loan amount you need. Submit the required documentation and provide your best possible application. Stronger applications get better loan offers.

Accept

If your application meets the eligibility criteria, the lender will contact you with regard to your application. Provide any additional information if required. Soon you’ll have your loan offer. Some lenders send a promissory note with your loan offer. Sign and return that note if you wish to accept the loan offer.

Repay

The loan then gets disbursed into your U.S. bank account within a reasonable number of days (some lenders will be as quick as 2-3 business days). Now you need to set up your repayment method. You can choose an autopay method online to help you pay on time every month.

About Stilt

Stilt provides loans to international students and working professionals in the U.S. (F-1, OPT, H-1B, O-1, L-1, TN visa holders) at rates lower than any other lender. Stilt is committed to helping immigrants build a better financial future.

We take a holistic underwriting approach to determine your interest rates and make sure you get the lowest rate possible. 

Learn what others are saying about us on Google, Yelp, and Facebook or visit us at https://www.stilt.com. If you have any questions, send us an email at [email protected]

Frank Gogol

I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.

Does refinancing release cosigner?

Can you refinance a cosigned loan?

Is it hard to remove a cosigner?