Why would you Agree to be a Cosigner
It’s possible your child, a family member or possibly a close friend may apply for a mortgage from a Toronto mortgage broker and be denied by a lender. They may ask you to help them out and agree to be a cosigner on their mortgage which means you agree to pay their debt in the event of a default. Becoming a cosigner is simple if you have good credit and adequate income to assume to debt. Your name will likely not be on the title of the home, but appear only on the loan.
How to Remove your Name as a Cosigner
Should you for some reason wish to have your name removed from the mortgage loan it can be a complicated process. The following are steps you can take to have your name removed.
Step 1) Contact the lender a request a cosigner release option, some mortgage agreements will include this kind of clause. Should the primary borrower make payments on time for a designated period the cosigner can then have their name removed from the mortgage loan.
Step 2) Ask the lender the primary borrower to refinance the mortgage loan if there is no clause to release the cosigner. In this case, refinancing by the primary borrower is the only way to have a cosigner’s name removed, the primary borrower must apply for a new mortgage in their name only.
Step 3) Request the lender to review the documentation, removing your name from the mortgage to see if it is subject to the primary borrower qualifying for financing on their own. He will then provide the lender with tax returns, recent paycheck stubs and bank account statements. The lender can check his credit score to and debt to income ratio to assess his ability to assume the debt.
Step 4) Wait for the loan to close, if the lender approves refinancing the company will create a new loan to pay off the existing balance which you cosigned. Your name will automatically be removed once the old loan is paid off and the primary borrower signs the new mortgage documents at closing.
Agreeing to co-sign on another person’s debt is a generous thing to do as you must literally be willing and financially able to assume responsibility if the person defaults. The best possible outcome will see the primary borrower assuming the debt on their own as their finances improve over time. If you have any questions, contact Rakhi Madan Mortgage Agent.