How to remove a co-applicant's name from home loan?

Applying for a home loan helps finance one’s house purchase or construction. Moreover, having a co-applicant reduces the debt burden and has several benefits, such as increased eligibility and improved credit score. However, while sharing the financial obligation, in the long run, it is essential to ensure regular payments. Sometimes, a few years later, one may prefer to remove the co-applicant’s name from the ownership deed and home loan agreement. This could be because of insolvency, the co-applicant’s death or divorce, in case the co-applicant is the spouse. In such scenarios, the co-applicant’s name can be removed from the home loan documents.

Table of Contents

Who is a co-applicant?

A co-applicant is an individual who applies for a home loan along with the primary loan applicant. The person shares equal responsibility to repay the loan and is liable for any payment defaults or delays. To be a co-applicant, one should have a steady income source and a good credit score when applying for a home loan.

How to remove a co-applicant’s name from a home loan?

The removal of a co-applicant’s name from a home loan requires the consent of both parties. The bank or lending institution may have specific conditions for removing a co-applicant’s name from the loan.

Request a novation

One should contact the lending institution to remove the name of the co-applicant. A novation is a legal process for replacing one party with another in a contract. With a declaration, one can shift the responsibility of the home loan repayment from two borrowers to one. It is essential to check if the lender allows this option by referring to the home loan agreement.

Specify reasons for novation

One has to provide a valid reason for novation, such as a change in marital status, financial difficulty or any other reason to prove that it is necessary to remove the co-applicant’s name. In case of replacing the co-borrower with another person, one has to fulfil the lender’s eligibility criteria.

Submit documents

For the novation process, one has to provide relevant documents to the lender, including a request for novation and a copy of the original loan agreement. Adequate proof must be given to the lender to show the reason for the removal of the co-applicant from the loan agreement. For example, if it is due to a poor credit score, a copy of the credit report should be submitted.

The primary applicant has to prove their eligibility to remove a co-applicant by furnishing specific documents, including proof of income and proof of assets.

The lender will review the written request from the borrower and verify the documents. If the request is approved, a new loan agreement with the borrower’s name will be issued.

Refinance the balance loan amount

A method that borrowers can consider for removing a co-applicant’s name is to refinance a home loan. One can apply for a new loan in their name and use the proceeds to pay the existing loan dues. The borrower must assess their financial situation before applying for refinancing of a home loan, including credit score, income and assets. When applying for a loan from a new lender, one must ensure that the loan amount is adequate to cover the outstanding balance of the existing loan and any additional costs associated with refinancing.

FAQs

Can a co-applicant be removed from a home loan?

Yes, a co-applicant’s name can be removed from the home loan by completing the legal process known as novation.

Can a joint home loan be transferred to one person?

Yes, one can approach the lender to request to remove the co-applicant’s name from the home loan document.

How do I change my home loan to another person?

One has to submit a request to their lender to replace the co-borrower with another person.

How to transfer my home loan to a new owner?

One must submit a letter to the existing lender requesting a balance transfer.

How to add a co-applicant to a home loan?

Through a novation request, one can ask the lender to add a co-applicant to the loan agreement.

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Harini Balasubramanian

Harini is a content management professional with over 12 years of experience. She has contributed articles for various domains, including real estate, finance, health and travel insurance and e-governance. She has in-depth experience in writing well-researched articles on property trends, infrastructure, taxation, real estate projects and related topics. A Bachelor of Science with Honours in Physics, Harini prefers reading motivational books and keeping abreast of the latest developments in the real estate sector.