It’s easy to imagine circumstances where you wish to drop a borrower from your mortgage. You may have been through a divorce or the breakup of a long-term romantic relationship. Or perhaps the friend or sibling with whom you bought the home has moved on. Worse, a signatory may have died.
Good news: you can remove a borrower using an FHA streamline refinance in cases of divorce, legal separation, or death of a borrower.
However, you may have to clear some hurdles before your lender removes someone from your mortgage agreement.
Read on to discover what those hurdles are and ways to jump them.
Key Takeaways
- To remove a borrower from an FHA loan, re-verification of income and credit is typically required unless you meet specific conditions
- FHA cash-out loans, conventional mortgages, or loan modifications can also be used to buy out a co-borrower’s share.
How to Remove a Borrower Using an FHA Streamline Refinance
Removing a co-borrower from an FHA mortgage almost always means refinancing into a new loan in just your name. The FHA doesn’t permit you to simply “take them off” the deed or note you need a fresh mortgage where you alone qualify. The easiest way to accomplish this is through an FHA streamline refinance because it avoids a full appraisal, waives most income and employment documentation, and requires only a limited credit review.
So, you can drop your co-borrower and secure a new FHA note in your name with fewer hoops and lower closing costs than a standard FHA refinance.
Here’s how to make it happen:
- Make sure you meet seasoning requirements:
- FHA Streamline Refinance: If your current FHA loan is seasoned (at least six payments made and 210 days elapsed) and you only want to drop your partner, you can do a credit-qualifying streamline refinance. You’ll need to qualify on your own income and credit, but you avoid a new appraisal and income documentation can be minimal.
- Standard FHA Refinance: If you don’t meet streamline seasoning or you want to change terms (e.g., cash out equity), a full FHA refinance lets you remove a borrower but it requires a full appraisal, underwriting, and income verification.
- Check your eligiblity and gather documentation
- Gather Pay stubs, W-2s, tax returns.
- You must meet FHA’s minimum credit score (usually a minimum of 580+ for 3.5% down) on your own. Refi.com usually requires a credit score of 620 or more.
- Make sure you have your current mortgage statement, homeowners insurance, and proof you’ve occupied the home (if it was originally owner-occupied).
- Shop lenders and submit applications
- Not all FHA lenders advertise borrower‐removal refinances, so call around. Explain up front that you need to refinance into a sole-name FHA loan.
Get an FHA streamline refinance rate estimate!
Scenarios Where You May Not Need To Refinance
The FHA’s rules are slightly different when you have a final divorce decree or a co-borrower passed away.
If you’ve made at least six months of payments on your own, you may not need to apply for an FHA streamline refinance to get the co-borrower removed
To do this, you will have to show that:
- The mortgage is paid up to date
- The last six months’ payments were made by you personally, not partly by the other borrower or anyone else. You can use canceled checks or bank statements to do that
Naturally, you’ll also have to prove that you have a legal claim to the home. That could be a court order from the divorce court. Or, after a death, it might be a will or other document showing your ownership. Those can stand in for the other borrower’s consent to be dropped from the mortgage agreement.
Adding a Borrower to Your FHA Loan
You can add a borrower to your FHA loan using a refinance, but they must generally qualify under FHA’s normal credit and income rules, unless you’re using an FHA streamline refinance. In that scenario, HUD lets you add someone to title without a fresh appraisal or full credit check.
Always confirm with your lender, since requirements may vary.
Alternatives to Co-Borrower Removal
Because FHA streamline refinances cannot include a cash-out component, they won’t provide the funds needed to buy out your co-borrower’s share. If you need cash to settle a divorce or purchase your co-owner’s equity, consider these other strategies:
- FHA Cash-Out Refinance: Lets you tap into your home’s equity (up to 80% of its value) to pay off your co-borrower. This option carries FHA mortgage insurance but gives you a lump sum at closing.
- Conventional Cash-Out Refinance: With sufficient equity (typically 20–25%), a conventional cash-out refinance can eliminate FHA mortgage insurance and might offer lower rates, reducing your long-term costs.
- Home Equity Loan or HELOC: A second mortgage or line of credit often has lower upfront fees and more flexible repayment terms than a cash-out refinance, helping you finance the buy-out without disturbing your first mortgage.
- Loan Modification: If you qualify under financial hardship (for example, a divorce), your lender may offer a modification: extending your term or reducing your rate. With the co-borrower’s consent, and proof of hardship, you can revise your loan payments and remove the second signer without refinancing.
Each of these paths has its own eligibility rules, costs, and timelines. Refinancing into your own FHA loan is the simplest way to remove a co-borrower, but if you need cash to buy them out, be sure to compare rates, fees, and long-term savings to decide which aligns best with your goals.
Compare your options with a Refi.com loan expert.
