Refinancing to remove a co-signer from your mortgage

Written by Samantha SheltonNMLS 1647301Updated October 2026

Refinancing is the standard way to remove a co-signer from a mortgage, because the new loan pays the old note off in full and the guarantee your co-signer signed has nothing left to attach to. Freddie Mac tells homeowners to expect refinance closing costs of 3% to 6% of the loan principal, and to clear underwriting alone you generally need Fannie Mae’s minimum 620 representative credit score on a manually underwritten fixed-rate loan.

The catch is the word “alone.” Fannie Mae’s automated underwriting system caps total debt-to-income at 50%, and this time the calculation runs without your co-signer’s earnings in it.

Learn how refinancing to remove a co-signer works, what you need to qualify on your own file, how the rules shift by loan program, and what to do when a refinance isn’t possible yet. Our Refinancing & Home Equity guide covers the fundamentals first.

Key takeaways:

• A refinance is the only reliable release: Paying the old note off is the single event that ends a co-signer’s liability, and Freddie Mac puts the cost of doing it at 3% to 6% of your loan principal.
• You have to clear the bar by yourself: Expect a 620 minimum representative credit score on a manually underwritten conventional fixed-rate loan (640 on an adjustable-rate loan) and a debt-to-income ratio at or under Fannie Mae’s 50% automated-underwriting ceiling.
• Deed is not debt: A quitclaim deed or a divorce judgment moves title, not liability, and your co-signer stays 100% liable on the note until the loan is refinanced, assumed with a written release, or paid off. Fannie Mae does let a lender leave the payment out of their debt-to-income ratio once 12 months of on-time payments by another obligated party are documented, but the obligation itself survives.

What does a co-signer actually guarantee?

A co-signer guarantees the entire debt, not a share of it. Fannie Mae’s definition is blunt: a co-signer has no ownership interest in the property as shown on title, signs the mortgage note anyway, and carries joint liability for it alongside the borrower. No equity, no deed, full exposure.

That separates a co-signer from a co-borrower, who takes title and lives in the home, and from a non-occupant borrower, who signs the note but lives elsewhere. A pure co-signer holds nothing and owes everything. Our breakdown of co-signing a mortgage: risks and benefits walks through what they took on.

It also explains why the lender asked for one. On a conventional loan that uses a co-signer’s income to qualify, Fannie Mae caps loan-to-value at 90% when the file is manually underwritten and 95% through Desktop Underwriter. Manual underwriting adds one more test: counting only the occupying borrower’s income, the debt-to-income ratio may not exceed 43%. The co-signer bridged a gap the file couldn’t bridge alone.

How does refinancing remove a co-signer?

Refinancing removes a co-signer by extinguishing the obligation they guaranteed. The new loan pays the old note off in full, the prior lender releases its lien, and the guarantee attached to that note ends with it. Short of paying the balance off outright or an assumption the lender approves with a written release of liability, nothing else “removes” anyone; the payoff does the work.

Fannie Mae treats this as a limited cash-out refinance, what most people call a rate-and-term refinance, and its requirements are lighter than homeowners expect. At least one borrower on the new loan must be an owner on title at the initial application, with no seasoning requirement for how long they’ve held it. Exceptions cover a borrower obligated on the loan being paid off but not on title, and one legally awarded the property through a divorce, separation, or dissolution of a domestic partnership.

Cash back is where the limits bite. A limited cash-out refinance allows no more than the greater of 1% of the new loan amount or $2,000 back to you. Ask for more and the file converts to a cash-out refinance, which starts its own clock: 6 months of ownership before disbursement, and a first mortgage at least 12 months old measured note date to note date. Planning to pull money out at the same time? Read refinancing for home improvements first, then our guide to refinancing eligibility.

Do you qualify to refinance on your own?

Six things decide it, and five are numbers you can check today. Run your file against this list first; a denial costs a credit inquiry and weeks you could have spent fixing the weak line.

• Credit score, 620 is the conventional floor: Fannie Mae’s minimum representative credit score is 620 on manually underwritten fixed-rate loans and 640 on ARMs. Desktop Underwriter casefiles carry no stated minimum; the system runs its own creditworthiness assessment instead. See what counts as a good credit score and what actually moves your FICO score.
• Debt-to-income, 50% is the automated ceiling: Through Desktop Underwriter, Fannie Mae’s maximum allowable ratio is 50%. Manually underwritten loans start at 36% of stable monthly income and stretch to 45% when the borrower meets the Eligibility Matrix’s credit score and reserve requirements. The CFPB explains how lenders calculate your debt-to-income ratio; our DTI guide shows how to lower yours.
• Income you can document alone: The co-signer’s earnings vanish from the calculation. Two full years of history is the usual expectation for bonus, commission, and self-employment income, so last month’s raise rarely carries the file.
• Equity, measured as loan-to-value: Divide the new loan amount by the appraised value. An FHA rate-and-term refinance allows a maximum 97.75% loan-to-value on a principal residence occupied for the previous 12 months; conventional limits vary by program and property type.
• Payment history the underwriter can see: Twelve months of on-time mortgage payments is the cleanest version of this file. Lates on the loan you’re refinancing are the fastest way to lose a program.
• Cash to close, 3% to 6% of the loan principal: Freddie Mac’s estimate. Some can be rolled into the new balance, which raises what you owe rather than erasing the cost.

If your score is the weak line rather than your income, the door isn’t closed. Refinancing with a low credit score covers the programs that reach further down the scale.

What does it cost to refinance a co-signer off the loan?

Budget 3% to 6% of your loan principal, Freddie Mac’s published range for refinance costs. On a $220,000 balance that’s roughly $6,600 to $13,200, covering the appraisal, lender’s title insurance, origination, recording, and prepaid taxes and insurance headed into a new escrow account.¹

Here’s the honest part: a refinance done purely to release a co-signer is not a savings transaction. If today’s pricing is higher than the rate on your note, you’ll pay more every month and pay closing costs for the privilege. There’s no break-even date to calculate, because you aren’t buying a lower payment. You’re buying a release. Freddie Mac’s Primary Mortgage Market Survey shows where rates sit.

It’s often worth it anyway. A co-signer carrying your full mortgage payment in their debt-to-income ratio can be locked out of buying their own home, and the relief available to them is conditional rather than automatic: Fannie Mae lets a lender exclude the payment only when the party making it is also obligated on the debt, there are no delinquencies in the most recent 12 months, and 12 months of canceled checks or bank statements prove it. A court order assigning the debt in a divorce can do the same. One late payment collapses that argument, and none of it releases them from the note. Weigh the monthly cost of the refinance against what the open obligation costs them.

How your loan program changes the answer

The mechanics are identical across programs; the thresholds and waiting periods are not. Because Align is a broker, we can place a conventional, FHA, or VA refinance through partner lenders and compare all three against your file.

Conventional loans

Conventional financing sets a 620 minimum representative credit score for manually underwritten fixed-rate loans and 640 for ARMs, with no stated minimum on Desktop Underwriter casefiles, and tops out at 50% debt-to-income through automated underwriting. Because removing a co-signer is a limited cash-out refinance, there’s no ownership seasoning to wait out. On a two- to four-unit building the loan-to-value limits tighten, and refinancing a multi-family home explains how the underwriting differs.

When a co-owner is bought out rather than merely released, Fannie Mae allows that as a limited cash-out refinance too, provided the property was jointly owned for at least 12 months, all parties sign a written agreement, and the remaining party qualifies alone.

FHA loans

FHA reaches further down the credit scale. A minimum decision credit score at or above 580 earns maximum financing; a score between 500 and 579 caps the loan at 90% loan-to-value; below 500 the borrower isn’t eligible for FHA-insured financing at all. An FHA rate-and-term refinance allows up to 97.75% loan-to-value on a principal residence occupied for the previous 12 months.²

There’s also a narrow path most homeowners never hear about. FHA’s non-credit-qualifying streamline refinance normally requires every borrower to stay on the new loan, but HUD carves out an exception for divorce, legal separation, or death: a borrower may be removed from title and the mortgage when the decree awarded the property and payment responsibility to the remaining borrower, and that borrower documents six months of payments before case number assignment. Streamline seasoning still applies: six payments made, six full months since the first payment due date, and 210 days since the closing date of the loan being refinanced.

VA loans

VA sets no minimum credit score of its own; the thresholds you’ll be quoted are lender overlays, and they vary between wholesale lenders.³ Federal law does set a seasoning floor: a VA loan can’t be refinanced until the later of six consecutive monthly payments on the loan being refinanced, or 210 days after that loan’s first payment due date. Note the reference point. It runs from the first payment due date, not the closing date, which pushes the earliest eligible date about a month later than people assume.

What are the alternatives if you can’t refinance yet?

Five exist. The table compares them on the terms that decide it.

What’s not on the list matters just as much. A quitclaim deed, a divorce decree, a verbal agreement, and a loan modification all leave the note intact. A modification changes the existing debt’s terms; it doesn’t replace it, so the co-signer’s name stays put. Our overview of refinance situations covers the life events behind most of these decisions.

What Michigan homeowners should know

Most co-signer removals in Michigan start with a divorce file, and the paperwork that ends a marriage is not the paperwork that ends a mortgage obligation.

• A judgment of divorce binds you, not your lender: A Michigan circuit court can order one party to refinance by a deadline, and that order binds the spouses. Your lender isn’t a party to the case, so the note stands as written until it’s paid off, assumed with a written release, or refinanced.
• Recording the deed costs $30 per document: A Michigan register of deeds charges $30 per document regardless of page count under MCL 600.2567. Recording a quitclaim deed in Oakland, Wayne, or Macomb County makes the title change public; it doesn’t notify your servicer or change who owes the debt.
• Federal law protects the transfer, not the borrower: Under 12 U.S.C. § 1701j-3(d), a lender may not exercise a due-on-sale clause on a transfer resulting from a divorce decree, a legal separation agreement, or an incidental property settlement by which the borrower’s spouse becomes an owner. The statute says nothing about liability, which is the point: the deed moves safely, the note doesn’t move.
• File the Property Transfer Affidavit within 45 days: Michigan requires the new owner to file one with the local assessor within 45 days of a transfer of ownership under MCL 211.27a, separately from recording the deed. Ask your assessor how yours is treated, because MCL 211.27a excludes several categories of conveyance from that definition.

If the refinance isn’t affordable yet, free HUD-approved housing counseling is available statewide, and our refinancing guide covers the timing question in more depth.

How do you refinance after a divorce to take an ex-spouse off the loan?

Start before the judgment is final if you can. The refinance deadline in a divorce judgment should be one you can actually meet.

The order that works

1. Check whether you can qualify alone. Have a loan officer review your income, debts and credit without your spouse, before the deadline language is agreed.
2. Count support income correctly. Alimony or child support you receive can count as income. The order has to be in place, the payments documented, and the support set to continue for at least three years.
3. Have your attorney review the refinance terms. The judgment should cover the deadline, what happens if you cannot qualify by then, who pays the mortgage until closing, and when the quitclaim is signed.
4. Settle how the buyout works. Paying your spouse for their share is often part of the new loan. Ask the lender how it treats the buyout before the amount is set.
5. Keep paying on time. Every on-time month protects both credit reports, including your former spouse’s chance to buy again.

If you cannot refinance yet

Ask your attorney whether the judgment should name a fallback, such as a sale, if the refinance does not close by the deadline. FHA and VA loans can sometimes be assumed with a written release of liability, and FHA’s streamline has the narrow divorce exception described above. A quitclaim deed alone changes neither path. Free HUD-approved housing counseling can help you weigh your options.

The Michigan tax question in a divorce

In Michigan, a transfer from one spouse to the other is generally not a transfer of ownership. So the quitclaim in a divorce does not uncap the home’s taxable value. Confirm it with your assessor when you file the Property Transfer Affidavit.

Before a judgment sets a date, Samantha can tell you whether you can carry the loan alone. If not yet, she can tell you what would need to change. Align does not give legal advice: your attorney reads the judgment, and Samantha reads the loan file. Align places conventional, FHA and VA refinances through multiple wholesale lenders, so one lender’s answer is not the only one you get.

FAQ: Refinancing to remove a co-signer

Here are answers to common questions about refinancing to remove a co-signer.

Can I remove a co-signer from my mortgage without refinancing?

Sometimes, but the paths are narrow. A few loans are assumable, letting one borrower take over with lender approval and a written release of liability. Some notes contain a co-signer release clause, though mortgages rarely do. Otherwise you refinance or pay off the loan. A decree or quitclaim deed changes ownership, not liability, as our guide to refinance situations explains.

What credit score do I need to refinance a co-signer off my loan?

Plan on 620 or higher for a manually underwritten conventional refinance, and 640 on an ARM. FHA reaches lower: maximum financing at a minimum decision credit score of 580, and a 90% loan-to-value cap between 500 and 579. Score is half the test; the lender also needs enough documented income to carry the payment. See refinancing with a low credit score for options below the conventional floor.

Can a co-signer force the borrower to refinance?

No. A co-signer can’t compel a refinance or remove themselves from the note. They can ask, and a divorce court can order a party to refinance by a deadline, but the lender still has to approve the new loan and no court order binds it. Until it closes, the co-signer stays fully liable and the debt keeps appearing on their credit report, one of the risks in co-signing a mortgage: risks and benefits.

What if I can’t qualify to refinance on my own yet?

Build the file instead of forcing it. Pay down revolving balances to pull your debt-to-income ratio under the 50% automated-underwriting ceiling, document bonus income across a full two-year history, and keep 12 months of on-time payments behind you. Rising values, or an FHA refinance with lower score thresholds, can also open the door. Our refinancing eligibility guide shows what underwriters check first.

The bottom line on refinancing to remove a co-signer

Refinancing removes a co-signer because it pays the old note off in full, and that payoff is the only event that reliably ends the guarantee. Freddie Mac puts the cost at 3% to 6% of your loan principal, and you’ll need to clear underwriting alone: a 620 minimum representative credit score on a manually underwritten conventional fixed-rate loan, a debt-to-income ratio inside Fannie Mae’s 50% automated ceiling, and enough documented income to carry the payment without your co-signer’s earnings. Deeds, decrees, and modifications don’t do it. Only a payoff, an approved assumption with a written release, or a refinance does.

If you’re ready to find out whether your file qualifies on its own today, talk to Align Lending, we’ll shop your scenario across our lender network and show you the numbers side by side. Call 248-506-5727 or start online today.

Footnotes:

1. Example figures in this article are hypothetical and for educational purposes only; they do not constitute an advertisement of credit terms or a rate quote under federal or state lending laws. Your closing costs and terms depend on your loan amount, program, property, and application, and will be itemized on your Loan Estimate and Closing Disclosure. Return to text.

2. Align Lending is not acting on behalf of or at the direction of FHA or HUD. FHA credit score, loan-to-value, streamline, and refinance requirements are set by HUD in Single Family Housing Policy Handbook 4000.1 and are subject to change. Return to text.

3. Align Lending works with VA-approved lenders and is not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency. Credit score thresholds on VA financing are lender overlays set by lenders in our network, not by VA. Return to text.

Sources: refinance costs of 3% to 6% of loan principal, Freddie Mac (My Home by Freddie Mac). Minimum representative credit score of 620 for manually underwritten fixed-rate loans and 640 for ARMs, and no minimum credit score for Desktop Underwriter loan casefiles, Fannie Mae Selling Guide B3-5.1-01. Maximum allowable DTI ratio of 50% for DU casefiles, 36% standard and up to 45% with credit score and reserve requirements for manually underwritten loans, Fannie Mae Selling Guide B3-6-02. Definition of guarantors, co-signers and non-occupant borrowers, the 90% manual and 95% DU LTV/CLTV/HCLTV caps when their income is used, and the 43% maximum DTI using only the occupying borrower’s income on manually underwritten loans, Fannie Mae Selling Guide B2-2-04. Limited cash-out refinance requirements, the owner-on-title-at-application rule with no ownership seasoning, the divorce/legal-award and obligated-but-not-on-title exceptions, the cash-back limit of the greater of 1% of the new loan amount or $2,000, and the co-owner buyout requiring 12 months of joint ownership and a written agreement, Fannie Mae Selling Guide B2-1.3-02. Cash-out refinance six-month ownership requirement and 12-month loan seasoning measured note date to note date, Fannie Mae Selling Guide B2-1.3-03. Exclusion of a mortgage payment made by another obligated party where there are no delinquencies in the most recent 12 months and 12 months of canceled checks or bank statements are documented, and treatment of court-ordered assignment of debt as a contingent liability the lender is not required to count, Fannie Mae Selling Guide B3-6-05. Minimum decision credit score standards (580 for maximum financing, 500 to 579 limited to 90% LTV, ineligible below 500), FHA rate-and-term maximum LTV of 97.75%, streamline seasoning of six payments, six full months from the first payment due date and 210 days from closing, and the divorce, legal separation or death exception permitting removal of a borrower on a non-credit-qualifying streamline with six months of documented payments, HUD Single Family Housing Policy Handbook 4000.1, Sections II.A.2 and II.A.8. VA refinance seasoning at the later of six consecutive monthly payments or 210 days after the first payment due date of the loan being refinanced, 38 U.S.C. § 3709(c). Prohibition on exercising a due-on-sale clause for transfers resulting from a decree of dissolution of marriage, legal separation agreement, or incidental property settlement agreement, and for transfers where a spouse or children become an owner, 12 U.S.C. § 1701j-3(d). Variation in DTI limits by loan product and lender, Consumer Financial Protection Bureau. Michigan register of deeds recording fee of $30 per document, MCL 600.2567. Michigan Property Transfer Affidavit filing within 45 days of a transfer of ownership and the exclusions from the definition of a transfer of ownership, MCL 211.27a. Weekly mortgage rate reference, Freddie Mac Primary Mortgage Market Survey.

This article is for informational purposes only and is not intended to provide legal, financial, or tax advice. Loan program guidelines, credit score thresholds, seasoning periods, loan-to-value limits, and Michigan recording and assessment requirements change and vary by lender, property, and situation; confirm your figures with your Loan Estimate and Closing Disclosure and consult a qualified attorney or tax professional about your circumstances. Figures shown are illustrative, are not a rate quote or an offer of credit, and are subject to change. Align Lending is an independent Michigan mortgage broker, NMLS #2041154.

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