If you have a co-signer on your mortgage and you’re looking to get their name removed (or if you’re a co-signer who would like your name removed), there are a few options that are available to you.
What is Involved in Removing a Co-signer?
|If you are staying in the home||If you need to refinance or are purchasing a new home|
If you do not need to access the equity you’ve built up, some lenders offer the ability to remove the other party’s name without replacing the mortgage.
However, you will need to requalify for a mortgage on your own. Don’t forget that you may be subject to the qualifying mortgage stress test.
It is important to note that if you initially put down less than 20 percent on your mortgage, it means that the mortgage is insured through either CMHC, Genworth or Canada Guaranty. Both parties will remain liable for the remainder of these fees even after the co-signer is removed from the mortgage.
If you do need to access the equity in your home at the same time as removing the co-signer, this generally involves amending the current mortgage through refinancing or remortgaging the property.
This is a common situation when you need help to pay off joint debts or when each person wants to use the equity in the home as a down payment for a new purchase.
Some lenders offer a spousal buyout program that allows you to access up to 95 percent of the value of the home (as opposed to a traditional refinance that only allows you to access up to 80 percent).
Either way, your lender will assess all of the same factors that they would if you were applying for a new mortgage. Our recent blog post details what lenders look for in a mortgage application, including your credit history and GDS/TDS ratios.
Remember, if you are refinancing and your mortgage is not currently up for renewal, you may also need to pay a ‘prepayment fee’ for breaking your mortgage early. Your broker can help assess your personal situation, take a look at current market rates as well as any prepayment penalties that would be incurred. This will give you a better understanding of whether it makes sense financially to remove a co-signer at that time.