Me and an ex-girlfriend purchased a home in 2000. In 2004 we split up. At that time, we refinanced and I received $45,000 to walk. My name was never on the deed, but only on the mortgage. I have not lived on the property or had any contact with her. Do I have any recourse to withdraw my name from the 2nd mortgage ? It is effecting my debt to income ratio on my credit report, leaving me unable to move forward with my life.
As a co-signer, you are guaranteeing payment in case the primary borrower defaults. The lender will report the account as a derogatory item on your credit reports if the primary borrower fails to pay. The lender will not remove you from the loan because your income, credit, and other factors were the basis for providing the loan and you signed loan documents that hold you liable in the event of a default.
There are three ways to have your name removed from the second mortgage. The first method is for her to refinance the mortgage to obtain an entirely new mortgage loan to pay off the existing second mortgage. The second method requires her to sell the home, assuming there will be sufficient proceeds from the sale, so that the second mortgage is paid off and you are no longer responsible for the loan. Finally, you can file for bankruptcy.
Because of the risks associated with being a cosignatory on a loan, lease, or other debt, I generally discourage the practice. I have seen far too many people who have cosigned loans for people whom they trusted end up in serious financial hardships when their friend or loved one failed to pay the debt as promised.
When considering cosigning for any debt, you should assume that you will be required to pay the debt yourself, and only agree to cosign if you know that you could pay the debt in full tomorrow without causing you or any financial hardship. If you do not have sufficient savings to pay off the debt for which you are cosigning, then it is probably imprudent for you to make such a potentially costly commitment. (See Will Co-signing On a Loan Hurt My Credit Score? for more about co-signing contracts.).
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