People who apply for a mortgage loan but do not qualify usually need a co-signor to get an approval. Helping a borrower get approved for a mortgage might look like the right thing to do, and signing a mortgage contract may seem like a simple task, but the responsibilities of co-signors in mortgage loans greatly exceed the potential benefits. Knowing the advantages of removing your name from a mortgage can help you free yourself from serious obligations.
Freedom From Long-Term Liability
Lenders treat borrowers and co-signors as parties who are both responsible for a mortgage loan. This means that whether you are the person who availed of the mortgage or a co-signor, you are committing yourself to a long-term liability that can last up to 30 years. If you are a co-signor, the mortgage agreement exposes you to financial obligations that can force you to pay over a long period of time for something that you did not buy. Removing your name from a mortgage can help you attain more freedom from long-term financial obligations and responsibility.
Peace of Mind
Once your name is included in the mortgage, you will be responsible for all payments, late fees, additional interest, and collection fees in case the principal borrower defaults on his financial obligations. You must be prepared to shoulder the additional expenses at any given time; otherwise, you will end up ruining your finances, including your credit. The possibility that your finances can be ruined anytime by the actions of another person can be a stressful thought that can cause you to worry or lose some peace of mind. By removing your name from a mortgage, you eliminate the fear lurking at the back of your mind.
Your current credit rating is directly affected by a mortgage you co-sign for because lending institutions normally include your name in reports submitted to credit bureaus. The debt will be reflected on your credit report and such information may harm your ability to get more credit. Lenders will know that you have more financial obligations and may not be willing to give you more financial responsibility. Removing your name from the mortgage can give you more room to apply for a loan for yourself in the near future.
Assuming responsibility for a mortgage by co-signing it exposes your properties to seizure. A borrower who defaults on his financial responsibility can be sued in court along with any co-signor, and judgments can be decided by the courts in favor of lenders. Such judgements can lead to orders for seizure of the borrower's assets along with the assets of the co-signor. By removing your name from a mortgage, you eliminate your assets’ vulnerability to seizure.
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- Names That Need to Be On a Mortgage
- What Legal Obligation Do You Have If Your Name Is on a Mortgage & Not on the Deed?
- Does Home Ownership Raise a Credit Score?
- How Long Can Co-Signers Stay on a Mortgage Loan?