In a week moment I agreed to help a friend get a mortgage by co-signing his note. My friend has always made the payments, but I discovered that his mortgage shows up as debt on my credit report, and it prevents me from getting a mortgage of my own. How do I deal with this?
These letters are typical of many I receive about co-signing problems. Too often, people co-sign without giving it much thought.
Once you co-sign a note, there are only two ways to get off. Either the loan must be repaid in full, by the borrower or you, or the lender must agree to take you off.
Lenders require a co-signer when they don't have enough confidence in the borrower. The lender is not going to let a co-signer off the hook when the borrower stops paying. The risk of non-payment is why the lender required a co-signer in the first place!
There is no way for the writer of the first letter to get off the hook. The lender doesn't care that the borrower left the co-signer's sister. The lender just wants to be repaid.
In the second letter, the borrower is making the payments but the co-signer is handicapped in getting a loan of his own because he would be required to step in if the borrower defaults.
This is a loan qualification problem, not a credit problem. Lenders impose limits on the amount of existing debt a borrower can carry, and the co-signing obligation is considered debt for qualification purposes.
This problem can usually be remedied by documenting that the borrower has been making the payments on time for a reasonable period. The lender in such case will probably remove the debt from your loan application. You remain a co-signer, but the lender is ignoring your obligation to the other lender in assessing your ability to repay a new loan.
My nephew has asked me to co-sign his mortgage. He says that after the loan is closed, I will be taken off the deed and my obligation will terminate. Is this right?
No. When you co-sign for a note, you stay liable for the repayment of the note until it is paid off. Taking your name off the deed does not eliminate that obligation.
My brother in law has asked me to co-sign for a home and the real estate agent tells me that after six month of good payment by the borrower I can be removed from the title and loan. Is this true?
Probably not. It is strictly up to the lender, who might let you off the hook in 6 months, or perhaps after 12 months, or perhaps never.
I have been asked to co-sign a rental agreement so a friend can get an apartment. Is this the same as co-signing for a loan?
They are very similar. If you co-sign for a loan, you are on the hook until the loan is paid in full, unless the lender lets you off. If you co-sign for a lease, you are on the hook for the period of the lease, unless the landlord lets you off.
