When your children get older, it’s absolutely normal for them to strive to become independent, and living separately is the first step towards that. And it is also absolutely normal for you as a parent to be willing to help your children as much as possible. So, when your child decides that the time has come for him or her to buy a home of his/her own, should you assist by co-signing the home mortgage? This is a very tricky matter, and it takes a lot of thinking to decide what is best for you both, because co-signing a mortgage for your child can with equal chances turn out to be a very good idea or not so good at all. Everything depends on what you want your role to be.
First of all, let’s look into the concept of co-signing in general. Why would a lender require a co-signer at all? The answer is simple: a lender will only require a co-signer, if an applicant for the mortgage does not meet all of the important criteria. A co-signer in this case is a person, who assumes responsibility in the event the borrower defaults on his mortgage obligations, e.g. fails to pay timely.
The first thing you should do before making a decision on co-signing is to carefully study all the terms of the mortgage and the proposed scheme of payments. It’s very important to have a clear idea of what you and your child are getting into and what is expected from you both in this regard. Is your son or daughter actually ready for all those house payments? If he/she needs a co-signer, the answer to this question is quite likely to be “no”.
If the financial status of your son or daughter is not quite sound, co-signing a mortgage for him/her may be a very bad idea, unless you have enough money to take the blow or just like to risk. It can once come and backfire on you, which is surely not what you want. So in this case the risk is probably not worth it, because you wouldn’t like to get into a situation in which the only thing that can happen to you is something bad. If this is the case, the wisest idea would probably be to convince your child to wait until he/she becomes financially sound and the situation becomes less risky for both of you.
If your son or daughter is overly anxious about getting a house, try to explain him/her that it’s not a failure if they do not achieve this goal right away – on the contrary, getting a house to quickly may well turn out to be a failure. In order to be ready for all the necessary house payments, your child should be financially backed, and the only way to achieve this is to work and build up a solid credit score. A good credit score means a possibility to make a good down payment and keep the monthly payments on a reasonable and affordable level, which is surely better than buying a house on high interest and oversized monthly payments. The main thing your child needs to realize here is that being too anxious will not pay off. Only patience and common sense will help to achieve the goal.
So, if the financial risk behind co-signing is too large, talk to your child candidly and explain why such responsibility is too much for you to take. However you should also explain him/her how he/she can work to improve the situation and make it acceptable for both of you. If everything is done correctly, in the end your child will not need a co-signer at all, which would be the wisest idea possible.