Will a lender release me from the loan if the other borrower assumes or refinances, and what steps do I take to request it? – North Carolina

Short Answer

Under North Carolina law, a lender will not automatically release a co-borrower from a mortgage loan just because another borrower assumes the debt or refinances. A true release requires the lender’s clear, written agreement—often through a formal assumption and release, novation, or payoff/refinance into the remaining borrower’s name alone. The co-borrower must affirmatively request that release from the lender and may also have separate reimbursement or contribution claims against the titled owner.

Understanding the Problem

The question is whether, under North Carolina real estate law, a co-borrower on a deed of trust note can be released from liability when the other borrower either assumes the loan or refinances, and what concrete steps are involved in asking for that release. Here, the focus is narrow: ongoing personal liability on the mortgage debt, not title to the property or partition, because the home is titled solely in another person’s name. The concern is whether the lender will look only to the titled owner going forward, and what a co-borrower can do procedurally to seek removal from the note and pursue reimbursement for payments already made.

Apply the Law

North Carolina law treats mortgage and deed of trust obligations as contracts. The lender’s rights against a co-borrower generally continue unless the lender clearly agrees to release that person or the statute governing dealings with assuming grantees operates to reduce or end liability. A refinance into the other borrower’s name, a lender-approved assumption with release, or specific dealings between the lender and the assuming owner can change who is liable and to what extent. Separate from that, contribution or reimbursement between co-obligors is typically handled through contract and equitable claims in civil court, not through the deed of trust itself.

Key Requirements

Existing personal obligation: The co-borrower signed the promissory note or other loan document and is personally liable for repayment, even if not on title.
Lender consent to release: The lender must clearly agree—usually in writing—to release that co-borrower, either through a refinance, novation, or a lender-approved assumption and release of liability.
Qualifying transaction or dealings: There must be either (a) a new loan in the remaining borrower’s name only, (b) a formal assumption approved by the lender, or (c) specific dealings between the lender and the assuming grantee that, under North Carolina’s deed of trust statutes, reduce or extinguish the original borrower’s liability.

What the Statutes Say

N.C. Gen. Stat. § 45-45.1 (Release of mortgagor by dealings with assuming grantee) – in certain sales where a grantee assumes the mortgage and the lender later extends time, releases the grantee, or releases property, the original mortgagor’s liability can be reduced or discharged.
N.C. Gen. Stat. § 45-36.23 (Obligation release) – describes how a recorded obligation release can remove specific obligations from being secured by a deed of trust and clarifies that personal liability may continue unless expressly satisfied.

Analysis

Apply the Rule to the Facts: In the described situation, the co-borrower signed the note and deed of trust but holds no title, so the lender can still pursue that co-borrower unless it affirmatively agrees to release them. If the titled owner refinances into a new loan in that person’s name only and the original loan is paid off and released of record, the co-borrower’s obligation on that original note ends because the debt is satisfied. If, instead, the owner seeks a lender-approved assumption of the existing loan, the co-borrower must negotiate for a written release as part of that assumption; otherwise, North Carolina law and the loan documents will usually keep the co-borrower on the hook. Separate from lender issues, the co-borrower may have a reimbursement or contribution claim in civil court for prior payments made that benefited the titled owner.

Process & Timing

Who files: The co-borrower initiates contact. Where: With the lender’s loss mitigation, assumption, or customer service department (not the courthouse). What: A written request for (a) a lender-approved assumption by the titled owner with a full release of the co-borrower, or (b) a refinance by the owner into a new loan that will pay off the current loan. Include loan number, property address, and a clear statement that release of personal liability is requested. When: As early as possible, before default or major credit issues arise, because the lender’s willingness and programs may be more favorable when the loan is current.
Once the lender receives the request, it typically reviews the titled owner’s credit, income, and property value to see if that owner qualifies alone. This underwriting process can take several weeks, depending on the lender’s pipeline and whether documents are promptly provided.
If the lender approves a refinance or assumption with release, it prepares new loan documents (for a refinance) or assumption/release paperwork. After closing or execution, the prior deed of trust is either satisfied of record or modified, and the lender should provide confirmation of the co-borrower’s release; any obligation release or satisfaction is then recorded with the county Register of Deeds. If the lender denies the request, the co-borrower’s next step is usually to pursue contribution or reimbursement from the titled owner through a civil action in the appropriate North Carolina trial court.

Exceptions & Pitfalls

Some loan documents or investor guidelines prohibit assumptions or restrict when a co-borrower can be released; in those cases, only a full payoff through refinance or sale may end liability.
A simple private agreement between borrowers (for example, the owner promising to “take over” payments) does not bind the lender; without lender consent, both signers usually remain liable.
If the lender records an obligation release that removes only part of the debt from being secured but does not state the debt is paid in full, personal liability can still continue; careful review of any release language is important.
Informal phone conversations with lender representatives can be misunderstood; obtaining written confirmation of any release and monitoring the Register of Deeds for a recorded satisfaction or obligation release helps avoid disputes later.
Claims for contribution or reimbursement against the titled owner may be limited by time-based defenses or by prior written agreements about who would bear the debt; evaluating those contracts early reduces the risk of missing a limitations period.

Conclusion

North Carolina lenders do not automatically release a co-borrower when another borrower assumes or refinances; a clear, lender-approved release or payoff of the original loan is required. The co-borrower must affirmatively request that the lender allow an assumption with release or a refinance into the titled owner’s name alone and confirm in writing that liability under the old note has ended. If release from the lender is not available, the key next step is to evaluate and, if appropriate, file a civil claim for contribution or reimbursement against the titled owner within the applicable limitation period.

Talk to a Real Estate Attorney

If a co-borrower remains on a North Carolina mortgage but does not own the property, our firm has experienced real estate attorneys who can help evaluate release options, lender procedures, and reimbursement claims. Call us today at (919) 341-7055.

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for any specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If there is a deadline, act promptly and speak with a licensed North Carolina attorney.