Majority of parents want to help their child any way they can, including cosigning on a mortgage. Most first-time homebuyers will need a home loan to pay for a house purchase.
And if your son or daughter isn’t financially stable yet but wants to buy a home and take out a home loan, you could help your child realize dreams of homeownership as a cosigner on a mortgage.
But before you do it, below are key things you need to be aware of.
You’re 100% Responsible for Completing the Mortgage Repayment
Cosigning on a mortgage means that you agree to be legally liable for paying off the mortgage in the event that your child, who is the primary borrower, defaults on the loan. You can inquire further on this from mortgage companies in Tempe such as VIP Mortgage.
So if you’re not 100% certain that you could shoulder the payments in case your child defaults, think long and hard about cosigning.
You’re Risking your Credit Score
Aside from a potential default, in the event that your child pays late or misses one mortgage payment, it might show up on your credit report.
Your Name is Not Automatically Added to the Deed of the Home
Even if you’re essentially shouldering the bulk of the financial responsibility when cosigning, you won’t be afforded legal claim or authority over what happens with the house. This is unless your child specifically grants you legal rights and puts your name on the deed.
Additionally, in the event that you outlive your child, you can’t just claim the house for yourself unless your child has a will specifying that you’ll get the house upon his death.
You Might Have to Put Off Your Borrowing Plans
Because of your liability as a cosigner, you would be hard-pressed to find a lender – whether for buying a car, property, or other assets using credit – that would work with you because you might be overextended.
If you choose to cosign, keep in mind that your relationship with your child comes above all else. So weigh all the pros and cons, as well as the risks of cosigning to help you make a more informed decision.