Can You Take Someone Off Your Mortgage?

When Can You Remove Someone From a Mortgage Without Refinancing?

Because lenders make loan decisions based on your combined creditworthiness when you apply with a co-borrower or cosigner, you can typically only take someone off a mortgage without refinancing in a few scenarios.

Liability Release Clause

Some loans have a liability release clause that allows a co-borrower or cosigner to be removed from a mortgage with the lender's approval. These clauses aren't common, and before the lender releases the other person from the loan contract, you'll likely need to show you can handle the mortgage payments on your own.

Even if your mortgage has a liability release clause, the lender has the right to deny your request.

Assumable Mortgage

With an assumable mortgage, your co-borrower or cosigner sells you the property, and you take over the payments. Government-backed mortgages—including FHA loans insured by the Federal Housing Administration, VA loans from the Department of Veteran Affairs and some USDA loans from the U.S. Department of Agriculture—are generally assumable, but conventional mortgages typically aren't. They often have "due on sale" clauses that require the remaining loan balance to be repaid in full when the property is sold.

If the loan is assumable, you'll probably need to go through the loan approval process again to determine whether you qualify without a co-borrower or cosigner. If you can't, the other person on the loan contract may remain financially obligated for the payments.

You get to keep the original loan term and interest rate when you assume a mortgage, unlike when you refinance, but you will have to pay closing costs again.

Lender Approval

Your lender may approve the removal of a co-borrower or cosigner even if your mortgage contract doesn't have a liability release clause, and you don't have an assumable mortgage. These situations are rare, and you'll need to show that you're sufficiently creditworthy independent of your co-borrower or cosigner.

Your lender will likely review your credit history, income and debt-to-income ratio before allowing you to take over the loan on your own.

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How Much Does It Cost to Remove Someone From a Mortgage?

The cost to remove someone from a mortgage ranges from nothing to several thousand dollars, depending on the process used. If your loan contract has a mortgage release clause, or your lender approves the removal, you may pay nothing.

But if you assume the mortgage, you'll need to pay a mortgage assumption fee, which varies based on the type of mortgage you're assuming, plus closing costs. The assumption fee for a VA loan is 0.5% of the loan balance. FHA loans have an assumption fee of $900 to $1,800, and the fee for USDA loans ranges from $300 to $500 or more.

Conventional mortgages are only assumable in limited situations, and fees vary by lender.

Tip: When you assume a mortgage, closing costs are typically lower than with a traditional mortgage because you may not need to pay certain fees, such as appraisal or origination fees,again. However, you may still need to come up with 2% to 5% of the loan balance to cover closing costs.

Potential Consequences of Removing Someone From a Mortgage

Taking sole responsibility for a mortgage is a big financial commitment. Before deciding to shoulder the financial burden alone, it's important to understand the consequences.

• Financial responsibility: Without anyone else on the mortgage, you're solely responsible for all of the payments. If you lose your job or experience a health emergency, no one else is obligated to make the payments. Having a solid emergency fund of six to 12 months' worth of living expenses can help you get through any rough patches.
• Credit implications: Late and missed payments will negatively affect your credit but will have no impact on your former co-borrower or cosigner because they're no longer responsible for the mortgage.
• Foreclosure risk: If you're unable to make your payments, the lender can foreclose on your property, and the foreclosure will stay on your credit reports for seven years.
• Ownership considerations: Taking someone off a mortgage eliminates their financial obligation to make the monthly payments, but it doesn't change their ownership status. If they remain on the deed after being removed from the mortgage, they may still own the property with you.

Learn more: Options if You Can't Pay Your Mortgage

What to Do if You Can't Get Someone Removed From a Mortgage

If your mortgage lender won't remove your co-borrower or cosigner from the mortgage and you can't qualify for a refinance, you have a couple of options.

Sell the House

Selling may be a good choice if you have equity in the home and can use the proceeds to purchase a new house where you're the only person on the mortgage.

However, if you're underwater on your mortgage because you owe more than it's worth, you'll need your lender to approve a short sale. Otherwise, you won't be able to sell.

Short sales can significantly harm your credit scores and make it difficult to purchase a new home for several years afterward. If you choose to move forward with this strategy, be sure you're prepared for the consequences.

Learn more: Short Sale vs. Foreclosure: What's the Difference?

Declare Bankruptcy

If your co-borrower or cosigner is struggling financially, they can declare bankruptcy. During the bankruptcy proceeding, their obligation to pay the mortgage will likely be discharged, and the lender will remove them from the loan.

As the co-borrower, you're on the hook for the remaining balance, which can work in your favor if you've been consistently making on-time payments. But if you're behind on the mortgage, it could backfire.

Bankruptcy proceedings don't prevent the lender from foreclosing on the property after the discharge. You'll need to get current on your payments if you want to remain in the house.

Learn more: What Is Chapter 7 Bankruptcy?

The Bottom Line

Getting a co-borrower or cosigner removed from your mortgage isn't easy. You must be able to show you can handle the mortgage payments on your own before your lender will agree to let you take over sole responsibility for the loan.

To prepare, take steps to get your credit mortgage-ready before making your case to the lender for removing your co-borrower. You can check your FICO^® Score^Θ for free from Experian any time to see what areas (if any) need improvement.