Board Topic: Can Parents Co-Sign on a Mortage?
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Can Parents Co-Sign on a Mortage?

Posted by: ajenks Nov 17 2003, 08:57 PM
Can parents co-sign on a mortgage for their kids? If so, what are the ramifications of doing so? Will I hurt me when it comes to getting equity loans on my current home?

Posted by: loanuniverse Nov 18 2003, 02:19 PM
Relatives can cosign for family as well as for unrelated people. The act of cosigning makes you liable for the debt as much as your kids. While I am not a consumer lender, the following is some feedback that I can give you regarding cosigning.

- The loan will appear in your credit report and count against you when calculating your debt service repayment capability.

- Once you sign, the only one that can remove you is the lender.

- Some lenders might mention that you will be taken off in a couple of years once the payment history has been established. This is only binding if it is in writing. A good lender would say something like “In a couple of years, we will look at the possibility of having your cosigner removed as long as there is a history of payments on time”. This is very subjective and does not guarantee that the same person will be there in two years or that the parameters will remain the same for the lender.

- There is a chance that the payments might not be counted against you if you can provide proof that your kids have been making the payments on their own. In order for that to work, you need an agreeable lender and a good history of payments in the loan.

- Removing you from the deed does not release you from the debt.

In conclusion, it is a good and noble thing to do, but it does have serious drawbacks that must be considered in detail.

Hope this helps.
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