Now you can listen to our blog post, "CIBC Investor’s Edge Review" while on the…
Now you can listen to our blog, “Remove Cosigner from Mortgage in Canada” while on the go.
So you cosigned on someone’s mortgage and now you want out? You want your name removed from the mortgage contract, right? Whether it’s because the other person isn’t making their portion of the payments. Or because they’re now financially capable of handling a mortgage on their own.
But, how are you going to get it off now? Or Is it possible to have a cosigner removed from a mortgage loan? The answer is yes!
Home refinancing is required to remove your name or the names of your co-signers from a mortgage. So that a new mortgage can take the place of the old one.
A name can’t just be scratched off mortgage paperwork without a new agreement. Which means refinancing or remortgaging will be required. But don’t panic; with the correct tools, it’s not as difficult as you would imagine.
Refinancing may be an option if the person taking up the mortgage on their own intends to continue with the same lender. If a different lender is chosen, remortgaging will be required. It will need obtaining a completely new loan to pay off the old mortgage. The debt would then be taken over by the new lender, who would treat it like any other sort of mortgage between the lender and the borrower.
However, it isn’t just a case of money transferring hands from one lender to the next. Formal documentation must be updated. Whether they plan to stay with the same lender or not, the borrower whose name will remain on the mortgage must qualify on their own in order to be authorized for a mortgage.
This may necessitate a down payment, and they will almost certainly be required to have decent credit. However, depending on how long they’ve owned the house and how much value it has, they might be able to leverage that equity to help them qualify for the loan.
Putting a co-name signer on a mortgage isn’t difficult; but, getting it off might be. Refinancing and remortgaging are both time-consuming operations that come with a slew of expenses, including a prepayment penalty if you have to break a mortgage to do so.
When you need to remove a cosigner from a mortgage, talk to a certified mortgage broker who can assist you. If necessary, locate a new lender with the best mortgage package.
What Are the Responsibilities of A Co-signer?
It’s vital to bear in mind that, as a co-signer, you are not responsible for half of the mortgage. Rather, both borrowers who are identified as co-signers are jointly and severally liable for the entire debt. If the person with whom you co-signed fails to pay his or her portion due to financial difficulties or other mitigating circumstances, you are responsible for the entire balance of the loan. This isn’t a minor point, and it’s one of the reasons why lenders are wary about removing a co-signer from a mortgage.
A mortgage with two cosigners provides more protection to lenders. The bank has more options to collect on the balance of the debt because there are two people who are responsible for the loan. As a result, by removing a name from a mortgage, the lender takes on more risk.
Even in the case of a divorce or separation, lenders may be unwilling to remove a cosigner from a mortgage. And you may not be able to get a name removed at all. Even if there is an agreement stating that one partner is entirely accountable for the debt, lenders can nevertheless collect from both loan applicants. This is particularly crucial to remember if you believe your current or previous partner may be unable to repay the debt.
It’s critical to take the measures necessary to get your name off the mortgage as soon as possible. Speak with a qualified mortgage advisor who can help you through the process.
Remove a Name From a Mortgage
A name being removed from a mortgage is usually the result of a divorce or domestic partnership ends. In order to legally remove a name from a mortgage in Canada, you must first obtain approval from the other mortgage holder as well as your mortgage lender. Refinancing your existing mortgage to buy out the party whose name is being removed from the mortgage could be one of your possibilities.
Step 1: Decide who will maintain the house and continue to make mortgage payments. The wisest decision is the party in the best financial position to hold the mortgage on their own.
Step 2: Submit an application for a new mortgage. The person who will keep the mortgaged property must apply for and be authorized for a new single-income mortgage. Any child support and alimony are given to the person who keeps the property during a divorce are frequently considered claimable income.
Step 3: Obtain a release letter. If the new application is accepted, the individual who wants their name removed from the mortgage can ask their mortgage holder for a letter of release. Under the provisions of the new mortgage agreement, they are no longer liable for mortgage payments.
Step 4: If required, carry out plan “B.” If the new mortgage application is turned down, both parties must agree to sell the house and pay off the entire debt. The bank loan will be satisfied, and both people’s names will be removed from the now-paid mortgage.
The Bottom Line
At Lionsgate, we specialize in helping people get the extra cash they need, obtain funding for private mortgages, as well as for other real estate transactions. If you are looking to buy land in Canada, get a mortgage or apply for a loan, fill the form below. Or, You can leave us a message and we will try to connect you with local lenders and sources that best meet your needs.
If you found this article helpful, please share it on your timeline and with someone you care about. Also, visit our blog to read similar helpful articles on finance, real estate, and getting mortgages.