Can I Refinance to Add a New Co-Signer?

A new borrower can co-sign on your refinance loan.

A refinance loan is a new loan that entirely replaces your existing loan. This means that the new loan can contain new terms, including potentially new borrowers and co-signers, than existed under the original loan. So, yes, you can refinance to add a new co-signer, as long as your refinance lender approves your application.

Application

To obtain a refinance loan you will have to apply to a lender. If approved, the refinance lender will pay off your existing lender, and you will begin making payments to the new lender under the refinance loan terms. The new lender has full legal authority to dictate the terms and conditions of the new loan, including authority to allow you to add a co-signer to the new loan. You will not need any type of approval from the prior lender.

Advantages

Adding a co-signer can help you obtain more favorable repayment terms on your refinance loan. For example, if your credit score is low but your co-signer's credit score is high, you will likely obtain a lower interest rate on the refinance loan by adding the new co-signer. Additionally, you limit your potential liability on the loan when you add a co-signer, because the co-signer becomes jointly obligated to repay the refinance loan. The co-signer's credit status can improve your loan's terms.

Disadvantages

Adding a co-signer on a loan means that the co-signer becomes fully obligated to repay the refinance loan if you fail to. This may be an advantage to the original borrower, but it is a disadvantage to the co-signer. Therefore, you should add a co-signer only if doing so provides a significant advantage in repayment terms or if the refinance lender requires the co-signer as a condition of approval of the refinance loan application. It is generally better to keep the number of borrowers limited, if possible, because this limits legal liability.

Consent

You can add a co-signer to your refinance loan only if the co-signer voluntarily signs consent to be obligated on the refinance loan. This generally means that the co-signer must submit and sign, with you, the refinance loan application, and the co-signer will have to sign all of the refinance loan documents. You cannot unilaterally obligate another person to become a co-signer on your refinance loan. The co-signer must provide permission to become obligated on the refinance loan.

References

• "Real Estate Finance Law"; Grant S. Nelson and Dale A. Whitman