Will I have ownership of the property if I cosign? No, you will not take on ownership if you're only a mortgage cosigner and not an actual co-borrower. As a cosigner, you're only guaranteeing the loan payment. Your name will not be on the title to the property.
Cosigning a loan doesn't give you any title, ownership, or other rights to the property the loan is paying for. Your only role is to repay the loan if the main borrower falls behind on the payments or defaults.
A co-signer takes on all the rights and responsibilities of a loan along with the borrower. This means that if the borrower can't make a payment on the loan, the co-signer is responsible.
What steps can I take to protect myself as a co-signer? Before co-signing, consult with a lawyer to understand your obligations and protections. Request written agreements from the lender about the extent of your liability and require the lender to notify you of any late payments.
Fortunately, you can have your name removed, but you will have to take the appropriate steps depending on the cosigned loan type. Basically, you have two options: You can enable the main borrower to assume total control of the debt or you can get rid of the debt entirely.
Remember, the primary borrower legally owns the vehicle, so an auto loan co-signer cannot take over without the consent of all parties and a refinance loan.
Request release from a co-signed loan
Co-signers can make a written request to the lender to be released from a loan. In certain cases, like some student loans, there may be a provision that allows a co-signer to take their name off a loan.
The cosigner is legally responsible for the debt if the primary borrower can't make payments. Any late or missed payments can negatively impact both parties' credit scores. Furthermore, the cosigner doesn't have any ownership of the vehicle.
Co-signers can lose their property if the loan defaults.
Keep copies of all paperwork on hand in case disputes arise, and ask the lender to notify you in writing if the borrower ever skips a payment.
A cosigner on a loan is legally responsible for the debt if the primary borrower defaults. Cosigning a loan will show up on your credit report and can impact your credit score if the primary borrower pays late or defaults. Cosigners may sign for student loans, personal loans, credit cards, and even mortgages.
Co-borrowers can remain in their role until the mortgage is fully paid off. However, if the primary borrower finds they're able to assume full financial responsibility for payments, or the co-borrower asks to be removed, the primary borrower can apply to refinance the mortgage to be in only their name.
You can only sell if you get permission from the other co-owner(s). If all the co-owners agree that you should sell a property, and when you should sell it, then there's no problem. Unfortunately this doesn't always happen.
Co-signing for someone else can impact your ability to get approved for a mortgage because it expands your financial obligation. The co-signed loan becomes part of your overall debt load, increasing your debt-to-income ratio (DTI).
Being removed as a cosigner from a loan could potentially hurt your credit scores. How much your scores are impacted depends on the details of your credit profile.
You, as the homeowner, typically hold the house deed to your property, even with a mortgage. The house deed and mortgage are separate legal documents with different purposes. A deed proves ownership and transfers title, while a mortgage is a loan agreement.
While you don't necessarily have the same rights to the vehicle as the primary borrower, you – as the co-signer – are equally responsible for ensuring the loan is paid back. If the primary borrower doesn't make their monthly loan payment, you will be asked to make the payment.
Being a cosigner does not give you rights to the property. A cosigner has no title or ownership in the property secured for the loan. Additionally, a cosigner has no legal right to occupy a home as a primary or secondary residence, unlike the primary signer/borrower.
Key Takeaways
Co-signers are responsible for repaying a loan if the primary borrower fails to do so. Co-signers have very limited rights compared with co-borrowers. It may be a good idea to create a written agreement with the primary borrower and to communicate regularly about the loan.
Removing a cosigner or co-borrower from a mortgage almost always requires paying off the loan in full or refinancing by getting a new loan in your own name. Under rare circumstances, though, the lender may allow you to take over an existing mortgage from your other signer.
Yes, you can sue the person you co-signed for if they don't make the payments they promised to make. You may be able to get a judgment against them in court, but it could be hard to collect that money since they didn't pay the debt in the first place.
If you want to refinance to remove a co-signer, you'll need to have sufficient credit and to be in good financial standing to handle the mortgage on your own. You may need to find ways to boost your credit score, lower your debt-to-income ratio, and otherwise prove to lenders that you can afford to pay the mortgage.
On the other hand, a co-signer is only responsible for making payments on the loan if you miss payments or can't pay it back. A co-signer also doesn't have their name on the property title and has no ownership rights to the home—they're just there to help you out.
If the borrower has the ability to pay and simply won't do so, you may want to consider legal action. You can file an action in small claims court (in some states such as Georgia this is the Magistrate's Court) to recover any amount you have to pay on the borrower's debt, plus court costs.
Agreeing to cosign a loan for someone is a generous thing to do, and risky. Such a noble deed will show up on your credit report, but the impact won't always be positive. On the one hand, your credit score might improve if the primary borrower executes timely payments.