Mortgage and Housing

Can A Co-signer Be Removed From A Mortgage?

Surety Contract?

By signing a surety contract with a bank, the guarantor assumes serious responsibility for the fulfillment of loan obligations.

However, if the debtor has stopped paying the loan, you should not immediately pay off the debt for it. You need to make sure that the surety has not been terminated in accordance with the requirements of the law.

For more information on whether it is possible to withdraw from the surety after signing the contract, and what are the grounds for refusing liability, read below.

As an additional guarantee of the borrower’s reliability, some banks may require a guarantee from third parties when applying for a loan. A surety is a form of securing the fulfillment of a client’s loan obligations.

The co-signer can be both individuals and individual entrepreneurs and organizations. It is the guarantor who undertakes to fulfill them in part or in full in the event of default by the borrower of its obligations to the lender.

The relationship between the bank and the co-signer is enshrined in the surety agreement, which is concluded together with the loan agreement. It describes in detail the entire key mortgage conditions, as well as the responsibility of the co-signer in case the borrower violates his obligations. Especially large mortgages and consumer loans may involve several guarantors. It all depends on the amount of borrowed funds, maturity, borrowers’ income and the policy of the credit institution.

The co-signer and the borrower       

The co-signer and the borrower are bound by credit obligations until the debt is repaid in full. In this case, the co-signer, according to the law, becomes a lender in relation to the borrower, which gives him the right to demand full reimbursement of the costs incurred to repay the debt under the loan agreement, including the payment of the principal debt and accrued interest, as well as compensation for other losses. If the borrower evades responsibility to the surety, then such a dispute can be considered in court.

A surety can be terminated without a full settlement with the bank or when the key lending conditions are changed without the consent of the guarantors, which led to an increase in debt (for example, an increase in the interest rate).

When signing a surety agreement, it is important to be aware of the full extent of responsibility and potential consequences that may affect not only the surety himself, but also his family. It also refers to the fact of inheritance of the obligations of the surety by his closest relatives or heirs.

IMPORTANT! Acting as a co-signer, a person risks a lot: their finances, property, credit history and reputation. Therefore, you should think very carefully before signing a surety agreement. Moreover, one should not think that it will be easy to get out of the situation when a surety is issued for an employee in the interests of a company that you do not own, but are just an employee.

 Grounds for termination of a surety agreement under the law

The following grounds for termination of the surety are determined by law:

  1. Death of the borrower.

The fact of the death of the main debtor is not a reason for terminating the surety, but this can become a significant reason for the termination of the surety agreement by filing an appropriate statement of claim in court.

  1. Expiration of the surety agreement.

The surety agreement is concluded for the period indicated in it. If such a period has not been specified, then the date of the end of the main loan agreement is taken as it.

  1. Liquidation of the borrower.

If the debtor is a legal entity, then the obligations of the guarantors will be terminated at the time of its liquidation.

  1. Lack of basic obligation.

The principal loan liability represents the amount outstanding under the contract and accrued interest over the period when the loan is used. The principal amount is usually determined in the loan payment schedule, which is in addition to the loan agreement. If the debtor has paid the amounts indicated in the schedule, then the surety has the right to seek early termination of the surety agreement.

  1. Bankruptcy of the borrower.

The recognition of the fact of bankruptcy in relation to the debtor consists in forgiving him all debts to creditors. After such a procedure, the surety is also automatically terminated due to the absence of the main obligation of the debtor. Here you should achieve the termination of the current contract in court or write off the debt.

  1. Execution of the surety agreement.

In order to simplify litigation on debt collection from guarantors and borrowers, some lenders use a standard contract form indicating the maximum amount that is secured by a surety. Usually this amount includes the principal debt and accrued interest for the entire loan period. Therefore, the creditor has no right to demand payment in excess of the amount specified in the contract.


Each guarantor who has entered into a surety agreement with the creditor, together with the main debtor, is jointly and severally liable for the fulfillment of obligations to repay the debt. In case of violation of the terms of the loan agreement by the borrower, all responsibility for repayment of the debt will fall on the guarantors.

Therefore, it is worth very carefully approaching such a serious issue as issuing a surety. It is important to familiarize yourself with the conditions for issuing a loan in advance, assess your real financial capabilities and agree to conclude an agreement only with full confidence in the borrower and his decency.

Termination of collateral is possible only if there are grounds provided for by law or if the withdrawal from the guarantee is agreed upon by replacing the responsible person with the bank.

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