Having a cosigner can make the difference between qualifying for a mortgage or not, especially if you’re dealing with limited income, weak credit, or a short financial history. However, as your financial situation improves, whether through a higher salary, a stronger credit score, or paying down other debts, you may consider removing that cosigner. This can ease their financial obligations, free up their borrowing power, or simply reflect a change in your relationship.

That said, taking someone off a mortgage in Canada isn’t as simple as signing a form. Lenders need to reassess your ability to carry the loan on your own, and the process often involves refinancing, requesting a release of covenant, or navigating legal and title changes.

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Key Takeaways

• You must meet all mortgage requirements independently to remove a cosigner or find a replacement.
• Refinancing is the most common path, but your lender may allow a release of covenant.
• Legal advice and lender approval are crucial before starting the process

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Why Would You Remove a Cosigner?

There are a few common reasons you may want to remove a cosigner from your mortgage:

• Your financial situation has improved, and you now qualify on your own
• The cosigner wants to free up their borrowing capacity for another loan or mortgage
• You’ve had a relationship breakdown (e.g., with a partner, friend, or parent)

Whatever the reason, removing a cosigner is ultimately about proving to your lender that you can shoulder the mortgage without their support.

What Lenders Need Before Removing a Cosigner

Mortgage lenders in Canada won’t remove a cosigner simply because it’s inconvenient to keep them on the paperwork. You’ll need to prove that you meet mortgage requirements on your own. This means:

• Confirming a steady, verifiable income
• A healthy credit score, usually 680 or higher
• A reasonable debt-to-income ratio
• Meeting the mortgage stress test, which requires proving you can afford payments at a higher qualifying rate

Your lender will reassess your file using current underwriting guidelines. If you meet all criteria on your own, they may allow the cosigner’s name to be removed.

Debt Service Ratios and Stress Test Implications

Removing a cosigner will shift your debt servicing ratios. That means your gross debt service (GDS) and total debt service (TDS) ratios must fall within approved limits based on your income alone. If your ratios are too high without the cosigner, your lender won’t approve the change.

Options to Remove a Cosigner From a Mortgage

There is no one-size-fits-all method to remove someone from a mortgage. Here are the five main options available in Canada:

Refinance the Mortgage in Your Name

This is the most common route. You apply for a new mortgage under your name only. If approved, the new mortgage will pay off the old one, and the cosigner will be released. This requires the cosigner’s approval through a legal change to the property title, which must be accepted and completed by a real estate lawyer or notary.

Pros:

• You can also adjust your mortgage term, rate, or amortization
• Can take advantage of lower interest rates and better prepayment privileges

Cons:

• May trigger a prepayment penalty
• Requires legal and administrative fees

Request a Release of Covenant

Some lenders offer a release of covenant, which allows the cosigner to be removed from mortgage liability without needing a mortgage refinance.

A release of covenant allows a cosigner to be removed from your mortgage without breaking the loan entirely, but it still involves a detailed review and legal steps. To start, your lender will need to reassess your ability to carry the mortgage on your own. This includes not only the remaining balance on the mortgage but also any other credit products tied to it, such as a secured line of credit or a home equity line of credit (HELOC). If you’re approved, this process helps you avoid triggering a prepayment penalty, since you’re not paying off or replacing the loan.

Once the lender completes their review and approves your file, they’ll send instructions to your real estate lawyer or notary. At that point, all parties listed on the mortgage, including the cosigner, must meet with the lawyer to update the property’s legal title. After the title amendment is completed and returned to the lender, they will officially remove the cosigner from the mortgage agreement.

Replace the Cosigner

In certain situations, you may not be able to qualify for the mortgage on your own. However, you still need to remove the current cosigner, either due to a change in relationship, their personal financial needs, or to improve their borrowing capacity. In these cases, replacing the existing cosigner with a new one can be a viable option. This approach involves bringing in a new, financially stable individual, such as a spouse, family member, or trusted friend, to assume the cosigner’s role.

The new cosigner must meet your lender’s qualification criteria. That means they’ll need a strong credit score, a steady and sufficient income, and a low debt-to-income ratio to help support the mortgage. Lenders will reevaluate the application, just as they did the first time, and this includes applying the current mortgage stress test to ensure that both borrowers (you and the new cosigner) can manage the payments at a higher qualifying interest rate.

Replacing a cosigner always requires a mortgage refinance. This means you’ll need to break your current mortgage contract and enter into a new one, either with your existing lender or a new one. If you’re in the middle of a mortgage term, this could result in a prepayment penalty, which can be significant depending on your interest rate type (fixed or variable) and the amount of time remaining on the term.

In addition to lender requirements, there are legal considerations. Because your mortgage is secured against the property, your real estate lawyer or notary will need to process a title change. This ensures that the departing cosigner is removed from the title, and the new cosigner is added as a registered owner (cosigner). These legal steps come with associated fees, which vary by province and complexity, but are an essential part of the process.

It’s also important to understand that this isn’t just a financial change; it can have long-term implications. The new cosigner becomes equally responsible for the mortgage debt, and their future borrowing ability will be affected. For this reason, everyone involved should consider seeking independent legal advice (ILA) before making the change, especially if the applicants are not related by marriage.

Replacing Your Cosigner with a Guarantor

An alternative to remove a cosigner from your mortgage is to replace them with a guarantor, someone who supports your mortgage application without becoming a legal co-owner of the property. While cosigners and guarantors are often discussed together, they serve distinct roles and carry different implications.

In Canada, a mortgage cosigner is added to both the mortgage and the property title. They share full legal responsibility for the loan and are considered co-owners of the home. A guarantor, by contrast, is only tied to the mortgage. They don’t appear on the property’s title and are only legally responsible for the debt if the primary borrower fails to make payments.

Switching from a cosigner to a guarantor may be worth exploring if the original cosigner no longer wishes to assume the responsibilities or risks associated with ownership. However, this change requires a mortgage refinance. Your lender will want to thoroughly reassess the loan application, which includes requalifying both the borrower and the guarantor under current lending rules. It’s also worth noting that many lenders may not approve this swap unless the guarantor’s financial profile is strong enough to back the loan without being added to the title.

This option is beneficial for family situations, such as when a parent wants to help a child qualify for a mortgage. If most of the income, down payment, or net worth on the application belongs to the parent, the lender may require them to be a cosigner instead of a guarantor to strengthen the file. That’s because the lender wants someone with a legal stake in the home if they are relying heavily on that person’s financial strength.

Still, choosing to act as a guarantor can be less complicated in the long run. Since guarantors aren’t on the title, they don’t need to be involved in title changes or property sales in the future. When the mortgage comes up for renewal and the primary borrower can qualify without assistance, the guarantor can be released without triggering a refinance or legal fees.

Sell the Property

If refinancing isn’t possible, your cosigner needs to be removed promptly, and there is no replacement cosigner or guarantor available to support the mortgage; in this case, selling the home may be your only option. This allows you to terminate the current mortgage contract entirely, settle any outstanding balance with the proceeds, and release all parties, including yourself and the cosigner, from future liability.

Pros:

• Clean break for both parties
• May allow you to cash out some equity

Cons:

• You’ll need to find another place to live
• Potential market risk if home values have declined

Option	Pros	Cons
Refinance the Mortgage in Your Name	Adjust mortgage terms, access better rates and prepayment privileges, and gain full ownership	May trigger prepayment penalties, legal and admin costs apply
Request a Release of Covenant	Avoids prepayment penalties, does not require a refinance	Still requires legal work, the lender may not offer this option
Replace the Cosigner	Maintains mortgage with support, allows for co-borrower substitution	Requires full refinance and legal title change, impacting the new cosigner’s borrowing capacity
Replace Cosigner with a Guarantor	Avoids legal title ownership, easier release at renewal	Lender may not approve the request, requires refinance and a strong guarantor profile
Sell the Property	Clean exit for all parties, may access home equity	Must vacate property, potential market loss if values have declined

Legal and Financial Considerations of Removing a Cosigner

In addition to lender approval, legal steps are often required to remove a cosigner. This may involve:

• Legal costs to change or transfer the property’s title
• Real estate lawyer or notary fees
• Appraisal fees if the lender needs a current home value
• Prepayment penalties and administrative fees to break and discharge the current mortgage

Legal advice is recommended and essential before changing or transferring the title of your property.

Impacts on Credit and Borrowing Power

For cosigners, being tied to a mortgage can restrict their ability to borrow elsewhere. Removing them not only protects their credit exposure but also frees them up to qualify for other loans, lines of credit, or mortgages.

For you, taking over full responsibility may boost your financial independence, but it also puts the onus entirely on you to keep up with payments.

Can a Cosigner Remove Themselves From a Mortgage?

A cosigner can’t simply request to be taken off a mortgage without the primary borrower’s approval. However, if they can prove financial hardship or a relationship breakdown, a lender may be open to renegotiation, often through refinancing or the release of a covenant, but only with the full participation of all borrowers.

How to Improve Your Chances of Getting Approved on Your Own

If you’re looking to take over your mortgage obligations independently, here are a few tips to improve your odds:

• Boost your credit score by paying bills on time and reducing balances
• Increase your income or show a stable employment history
• Pay down other debts to improve your debt ratios
• Start with a pre-approval to know what you can qualify for without a cosigner

Some buyers even wait a year or two after their home purchase with a cosigner to build up a stronger profile before requesting removal.

Frequently Asked Questions (FAQ) About Removing a Cosigner in Canada

Final Thoughts

Removing a cosigner from your mortgage is a significant step, typically indicating that your finances are now in a better position than when you first purchased your home. Whether you can now manage the mortgage on your own or need to change who is helping with it, there are several ways to approach the situation. Refinancing, requesting a release of covenant, bringing in a new cosigner, switching to a guarantor, or, in some cases, selling the property to reset the mortgage entirely.

Before proceeding, your lender will want to ensure that you can handle the mortgage independently. That includes checking your income, credit score, and debt levels. You may also need to address legal changes to the property title or pay penalties if you’re refinancing in the middle of your mortgage term. If taking over the mortgage entirely isn’t an option just yet, bringing on someone new as a cosigner or guarantor might be a helpful solution.

Regardless of which direction you’re leaning, it’s essential to understand your lender’s requirements and what’s involved. If you’re considering making a change, reach out to a nesto mortgage expert. We’ll walk you through your options and help you determine the best option for your unique needs.

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Why Choose nesto

At nesto, our commission-free mortgage experts, certified in multiple provinces, provide exceptional advice and service that exceeds industry standards. Our mortgage experts are non-commissioned, salaried employees who provide impartial guidance on mortgage options tailored to your needs and are evaluated based on client satisfaction and advice quality. nesto aims to transform the mortgage industry by providing honest advice and competitive rates using a 100% fully digital, transparent, seamless process.

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Contact our licensed and knowledgeable mortgage experts to find your best mortgage rate in Canada.

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