Should I co-sign mom’s mortgage?

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Lazysundays
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Should I co-sign mom’s mortgage?

Post by Lazysundays »

Details. Hubby and I just bought our forever home. $455,000 mortgage
My income $125,000
His income $95,000
My SL $105,000
No other debt
Credit scores >800
Live in NJ

Mom- excellent credit. Turning 70 this year. Insanely responsible with $, but she raised 2 kids on her own so she didn’t save a lot for retirement (around $100,000)
2 years ago she inherited around $200,000
Current ss benefits $1600 a month, hcol in NY

Currently she is living in an apartment while waiting for a coop in her price range to come up. Rent $1600 per month. She is looking for max $180,000 coop to pay for in cash ($800-$1000/mo home owner’s assoc fees)

I told her maybe she should aim for the ones currently available for $200,000 and take out a 30 year mortgage. She is afraid she won’t be approved since she is retired. Hubby says it’s ok if I want to co-sign with mom as we don’t need the tied up line of credit (we save for renovations etc in cash).

So, can I cosign without being owner of a coop? I don’t mind but am I allowed to?

Only unstable variable is my sister. Horrible with $ and a total control freak to boot. Easy 50/50 split of mom’s assets with no will. But with me on the mortgage and probably taking over the payments until we figure out if we want to (if she lets us) buy her out or until we sell the condo. Is this gonna be a major estate headache with me as co-signer or can a estate plan/will fix this without being too expensive?
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Watty
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Re: Should I co-sign mom’s mortgage?

Post by Watty »

Lazysundays wrote: Sat Jan 16, 2021 11:04 pm So, can I cosign without being owner of a coop? I don’t mind but am I allowed to?
I don't know much of anything about it one thing to look into is that in addition to getting a lender to approve a loan coop board may also need to review and approve her finances. Even if she can pay cash she might not be approved to buy the coop.

I suspect that it might make more sense just to loan her the money she needs to cover the shortfall with a personal loan that you document so you can get paid back when the coop is sold some day either because she needs to move or when her estate is settled. It might also be good to look at condos instead of a coop.
Lazysundays wrote: Sat Jan 16, 2021 11:04 pm Rent $1600 per month. She is looking for max $180,000 coop to pay for in cash ($800-$1000/mo home owner’s assoc fees)
With the association fees, mortgage payment, and the other costs I really don't see a huge advantage of buying instead of renting especially since it would make her house poor.

Here is a rent vs buy calculator that might be useful to help decide if buying really makes sense.

https://www.nytimes.com/interactive/201 ... lator.html

What is your reasoning in wanting her to buy instead of renting.
Last edited by Watty on Sun Jan 17, 2021 12:43 am, edited 1 time in total.
hlfo718
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Re: Should I co-sign mom’s mortgage?

Post by hlfo718 »

You need to find out the coop's requirements. Ask the mgmt company or the broker for the full application.

Most coops won't accept co-signers since they want the borrowers to be the people living there.

Be aware coops look back 6-12 months of bank statements in case you want to lend her the money.

Good luck
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Re: Should I co-sign mom’s mortgage?

Post by geerhardusvos »

Lazysundays wrote: Sat Jan 16, 2021 11:04 pm Current ss benefits $1600 a month, hcol in NY
I also think it’s probably wise for your mom to continue to rent. The cost of owning adds up quickly (HOAs, taxes, maintenance, you name it), and she will probably do better investing the money and renting. We know many folks in their 70s in HCOLAs who rent long-term with great success. The likelihood of seniors needing to transition to assisted living or wanting to move in or closer to family makes it ideal for many of them to continue renting if they already are.
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av111
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Re: Should I co-sign mom’s mortgage?

Post by av111 »

I think I would cosign for my responsible parents, children and siblings. But be careful because estates (yours and hers.. Anyone can pass away) should be clear on who pays what when the music stops and sister should be a part of the agreement
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cheese_breath
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Re: Should I co-sign mom’s mortgage?

Post by cheese_breath »

I agree with those who say she should keep renting. There are a lot of costs besides purchase price that go with ownership. She'd be cash poor if she bought, and she's approaching the age where medical expenses start creeping up on some of us.
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bampf
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Re: Should I co-sign mom’s mortgage?

Post by bampf »

Mom could rent for 10 years @180K. Buying it would tie up all capital (mostly) and also cost her $1K a month leaving just $600 a month or so for food, etc... This seems like a poor plan and I doubt she could qualify without help, which is why she would be looking for cosigners. If anything bad happens you are on the hook. If bad things happen to you, and she needs help, you lose a lot. Little to gain and much to lose in my opinion.
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celia
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Re: Should I co-sign mom’s mortgage?

Post by celia »

When anyone asks someone to be a co-signer, that means they can't afford it.
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cheese_breath
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Re: Should I co-sign mom’s mortgage?

Post by cheese_breath »

celia wrote: Sun Jan 17, 2021 1:39 am When anyone asks someone to be a co-signer, that means they can't afford it.
Cosigning was OP's idea, not the mother's. Mom was going to pay cash for a $180K condo when one became available. OP suggested mom get a $200K condo and volunteered to cosign if mom couldn't get approved for a mortgate.
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celia
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Re: Should I co-sign mom’s mortgage?

Post by celia »

cheese_breath wrote: Sun Jan 17, 2021 2:06 am
celia wrote: Sun Jan 17, 2021 1:39 am When anyone asks someone to be a co-signer, that means they can't afford it.
Cosigning was OP's idea, not the mother's. Mom was going to pay cash for a $180K condo when one became available. OP suggested mom get a $200K condo and volunteered to cosign if mom couldn't get approved for a mortgate.
OK. How about this:

When someone volunteers to be a co-signer, that means the other person can't afford it.

Rather than being on the hook for this mortgage, OP, why not just give your mother $20K instead? But, I think mom still can't afford it.
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cheese_breath
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Re: Should I co-sign mom’s mortgage?

Post by cheese_breath »

celia wrote: Sun Jan 17, 2021 2:15 am
cheese_breath wrote: Sun Jan 17, 2021 2:06 am
celia wrote: Sun Jan 17, 2021 1:39 am When anyone asks someone to be a co-signer, that means they can't afford it.
Cosigning was OP's idea, not the mother's. Mom was going to pay cash for a $180K condo when one became available. OP suggested mom get a $200K condo and volunteered to cosign if mom couldn't get approved for a mortgate.
OK. How about this:

When someone volunteers to be a co-signer, that means the other person can't afford it.

Rather than being on the hook for this mortgage, OP, why not just give your mother $20K instead? But, I think mom still can't afford it.
Much better. :wink: :wink:

Like you, I thought about just giving her $20K but decided she couldn't afford it.
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Re: Should I co-sign mom’s mortgage?

Post by Vanguard Fan 1367 »

You mention no will and a sister. I would recommend that before you co-sign you ask a good attorney if Mom should sign a will first protecting your interests.

I know someone having estate challenges with a brother.
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Lazysundays
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Re: Should I co-sign mom’s mortgage?

Post by Lazysundays »

Thank you for the replies. Food for thought.

My mom doesn’t want to keep her $ in the stock market or bonds etc, so this $ is not going to keep up with inflation. Mom has always been house poor as she moved us to a rich town for the education and then stayed because she fell in love with the area. She doesn’t drive. Her biggest expenses are health insurance and groceries. The woman knows how to be frugal. She refuses help. The $80,000 I inherited, I told her I would give it back to her at 4% a year like an annuity, so she accepts that monthly auto bank transfer. I tested to see if I can up the amount without another cosignature and it worked, so I can just keep upping it and no one will speak of it ;)

The problem with renting is she already is using 100% of her ss on rent, and we know rent will go up faster than the inflation adjustment.

There is no talking her out of leaving this town.

Maybe I should make an appointment and pay for her to see a fee per visit financial planner? Maybe they can walk her through the #s and even convince her to go back into investing?
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Lazysundays
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Re: Should I co-sign mom’s mortgage?

Post by Lazysundays »

Ps. I was mostly looking at mortgage to help her with cash flow with the ss and the $180,000 (minus 20% down) and the remaining $100,000 investments. But it sounds like maybe renting is best. I am looking at one rental for $1950 a month... will talk with her about it.
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Re: Should I co-sign mom’s mortgage?

Post by Archimedes »

Many coops come with periodic large assessments. Think about what can happen to a coop owner. What would you plan to do when there is a $10,000 assessment to repair the brick, or replace the roof?
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Re: Should I co-sign mom’s mortgage?

Post by kelway »

av111 wrote: Sun Jan 17, 2021 1:02 am I think I would cosign for my responsible parents, children and siblings. But be careful because estates (yours and hers.. Anyone can pass away) should be clear on who pays what when the music stops and sister should be a part of the agreement
I'm just here to say I think no one should ever, ever, never, ever cosign for siblings... and almost never, ever for parents. I learned the hard way.
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Re: Should I co-sign mom’s mortgage?

Post by Sandtrap »

Given the data on "sister", this decision might be better approached in a larger context and far forward looking.

Seek legal counsel for how these financial issues might effect long term estate planning and your liabilities at your mom's passing, etc.

Wondering if there could be other ways of assisting your mom in this without cosigning a loan.?

Perhaps "Bsteiner" might chime in with wisdom. :D
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Re: Should I co-sign mom’s mortgage?

Post by skipper »

kelway wrote: Sun Jan 17, 2021 8:01 am I'm just here to say I think no one should ever, ever, never, ever cosign for siblings... and almost never, ever for parents.
I'm just here to add I think no one should ever, ever, never, ever cosign for children... and almost never, ever for spouses. I, too, would give or loan money before co-signing.

My mom did the opposite at 70; had 10 years to go on a 30 year mortgage and decided to rent going forward
(in same LCOL) for the simplicity and liquidity of it. We have no potential estate complications like you either. Good luck, though; making big decisions with mom can be challenging but doable if they are practical. "Aim small, miss small."
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Re: Should I co-sign mom’s mortgage?

Post by galawdawg »

Lazysundays wrote: Sun Jan 17, 2021 5:22 am Ps. I was mostly looking at mortgage to help her with cash flow with the ss and the $180,000 (minus 20% down) and the remaining $100,000 investments. But it sounds like maybe renting is best. I am looking at one rental for $1950 a month... will talk with her about it.
You mention that the coop monthly assessments are $800-$1000 on top of the purchase price of $180k-$200k. If your mom rents a place with rent between her current $1,600/mo and the $2,000/mo or so you found, the purchase of the coop would only net her a savings of $600-$1,000/mo.

I believe your mom would be better served to continue renting and invest her money in something like the Vanguard Target Retirement Income Fund (VTINX). Target Retirement Income has returned an average of 5.64% annually since the inception of that fund in October 2003. Now that means that in some years the return will be lower and in some years, higher. In the worst year (2008), the fund declined 10.93%, but in the best year (2009) it gained 14.26%. It has only had three (3) years in its seventeen (17) year history when it has declined but each of the following years it gained significantly. At an allocation of 30/70, the fund is as conservative as it gets while still providing income and growth, so it is well suited for even the most cautious investor. Here is a chart of historical returns for Target Retirement Income: https://investor.vanguard.com/mutual-fu ... ve-returns. She can set up monthly automatic transfers to her checking account in an amount she chooses to supplement her current income.

I'd also strongly encourage your mom to have a will prepared as soon as possible.
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Re: Should I co-sign mom’s mortgage?

Post by Jack FFR1846 »

Why do you think her buying a co-op is better than renting?

It isn't.

Just stop.

If you insist on this, my prediction is that she won't be able to pay both co-op ongoing fees and the mortgage, so enjoy your new mortgage payments. At her death, your sister will get at least half the equity (that you paid).

This is nothing but a bad idea. Again, just stop it.
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Re: Should I co-sign mom’s mortgage?

Post by Shallowpockets »

$800-$1000 month HOA coop fees.
That is a deal breaker right there.
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wander
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Re: Should I co-sign mom’s mortgage?

Post by wander »

Op, can you buy the place and let your mom rent for less?
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Lazysundays
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Re: Should I co-sign mom’s mortgage?

Post by Lazysundays »

wander wrote: Sun Jan 17, 2021 9:50 am Op, can you buy the place and let your mom rent for less?
That seems like the easy route I’d be totally willing to do, but I read that coops don’t like that. There are no condos in the area. They are all co-ops :/
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Watty
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Re: Should I co-sign mom’s mortgage?

Post by Watty »

Lazysundays wrote: Sun Jan 17, 2021 4:40 am Maybe I should make an appointment and pay for her to see a fee per visit financial planner? Maybe they can walk her through the #s and even convince her to go back into investing?
You need to be aware that the fast majority of financial planners/financial advisors are really sales people that will not hesitate to put her into a terrible investment just to make money off of her. In particular they would likely try to sell her some sort of complex annuity like a variable annuity which they basically lie about with misleading statements to make them sound good when they are terrible investments.

If anyone tries to sell her a complex annuity then she should run because she is likely dealing with a sales person who is jut trying to make money off of her.

The only type of annuity that should ever be considered would be a Single Premium Immediate Annuity(SPIA). These are basically like buying a pension but with as low as interest rates are right now they don't pay a lot and she probably does not have enough to be able to buy one that would make sense.

Finding a good fee only financial planner is possible but they are expensive and she can't really afford to pay several thousand dollars to basically be told that she is short of money.

As others have said she really does need to have a will and all the related paperwork. The related paperwork with the things like the power of attorney documents and medical directives is especially important since it sounds like you and your sister may not always agree with what would need to be done if you mom was incapacitated and in a nursing home. For example consider how it would work without the needed paperwork if your mom buys the coop then five years later has a stroke and end up in a nursing home. The coop would need to be sold but without the needed paperwork that would be very difficult to do. Likewise if you mom ends up unconscious in a hospital then someone will need to decide what care she should get and if you an your sister disagree then she may not get the level of care she would have wanted. If the decision needs to be made to discontinue care when it is futile then that will also be a lot easier to do if you have her written instructions saying that is what she would have wanted.

There are lots of threads about how to make up a will that you can look up but I had a simple situation so I used LegalZoom where they have a bundle a will and related paperwork for a few hundred dollars. One advantage of that was that it includes a telephone conference call to go over your paperwork with a lawyer so it is better than other DIY options like preprinted forms or will making software. My impression is that it was just as good as a local budget lawyer would have done. I don't see where she needs or could afford a higher end lawyer to do her paperwork which would could several thousand dollars.

You also need to review your will to make sure that she will be taken care of if you die before she does. You may also want to consider getting more life insurance specifically to take care of her if you die. If you get entwined with her finances and then you die then your spouse could end up still needing to take care of a mother in law decades after you die. I have heard of this happening.
Lazysundays wrote: Sun Jan 17, 2021 10:29 am
wander wrote: Sun Jan 17, 2021 9:50 am Op, can you buy the place and let your mom rent for less?
That seems like the easy route I’d be totally willing to do, but I read that coops don’t like that. There are no condos in the area. They are all co-ops :/
You need to research this more. Having a relative live in it may be treated a lot differently than if you were going to rent it out to some random stranger.

I mentioned it in a prior post but I also suspect with many of the better coops that she would not be approved to buy a coop on her own with her finances.
Last edited by Watty on Sun Jan 17, 2021 11:29 am, edited 2 times in total.
aristotelian
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Re: Should I co-sign mom’s mortgage?

Post by aristotelian »

Why are you taking her word for it that she will not be approved? At 70 she has SS income and good credit. Couldn't hurt to put her numbers in a mortgage website to see if she could get pre-approval somewhere. Took me about 5 minutes recently on better.com.
Goal33
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Re: Should I co-sign mom’s mortgage?

Post by Goal33 »

Why can’t she take a mortgage on that income and those assets?
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Lazysundays
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Re: Should I co-sign mom’s mortgage?

Post by Lazysundays »

Again, thank you. Lots of food for thought. I will call her the coop directly.
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Lazysundays
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Re: Should I co-sign mom’s mortgage?

Post by Lazysundays »

galawdawg wrote: Sun Jan 17, 2021 8:56 am
I believe your mom would be better served to continue renting and invest her money in something like the Vanguard Target Retirement Income Fund (VTINX). Target Retirement Income has returned an average of 5.64% annually since the inception of that fund in October 2003. Now that means that in some years the return will be lower and in some years, higher. In the worst year (2008), the fund declined 10.93%, but in the best year (2009) it gained 14.26%. It has only had three (3) years in its seventeen (17) year history when it has declined but each of the following years it gained significantly. At an allocation of 30/70, the fund is as conservative as it gets while still providing income and growth, so it is well suited for even the most cautious investor. Here is a chart of historical returns for Target Retirement Income: https://investor.vanguard.com/mutual-fu ... ve-returns. She can set up monthly automatic transfers to her checking account in an amount she chooses to supplement her current income.

I took screenshots of these answers and this caught mom’s attention. She’s researching it and she’s considering it. She’s the one who brought this topic back up. I gave up on her wanting her $ invested. So thank you !!!!!!! 😁
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Re: Should I co-sign mom’s mortgage?

Post by Freetime76 »

Hello Lazysundays: it’s really nice that you and your mom can talk openly about this. Your mom saved $100K and has $300K total. Good for her!

A few thoughts after conversations with my own mom:
1. Mom is in a much better place if she is self-sufficient, beginning with housing. If mom decides to live in her (expensive) preferred area, then she (respectfully) needs to make it work. As mom, I would hesitate to build a life that is dependent on my daughter from the get-go - for my own sake. Hopefully, life is long, and a lot can happen over the years. Also, it’s tough to move, yet easier now than 10 years from now.

Example: My mom could not retire where she worked. Her friends were there, she loved the area etc etc. Reality check: She felt nauseous the day she realized it wasn’t going to happen the way she wanted. So. she moved, and she is very happy. Many transplanted retirees who moved for cheaper cost of living especially taxes, new friends, she worked a “fun job” for many years as something to do and a way to meet people (it had a lot of entertainment perks). Mom goes back home for a wild week or 2 each year. I’m not advocating, only trying to say that if it doesn’t work, then question your assumptions.

2. Your mom is young! (My mom is mid-70s, and she cringes when I tell her she might have decades to go :D lol) Her needs/wants may change in the future...meaning all her cash dollars in the house isn’t the best option. Especially true, since she is careful with her money. Also not good to have regular, expensive special assessments that eat at your money over the years. As others said, she can have her $200K or a little more (keep some liquid) invested to produce income. My mom uses dividends - I know not optimal, but she understands it and doesn’t like selling shares :happy . Mom now has *more* value in the account, not less after over 10 years, even though she is drawing off of it. Make sure your mom reads that :wink: .

3. Keep your own resources in reserve for an emergency/special and specific circumstances, not daily life if possible. Something could happen to you, to your income, your life situation...in fact you might retire (depending on your ages/etc).

4. You all can do this in stages. If your mom gets her money invested and draws an amount off it, she could wait a bit and see how much income she’s getting. Then decide if/what she wants to buy. It might help to have the consistent income for her loan qualification.

5. Mom: you need to do your will. Just do it :D . Lazysundays: If your sibling is a bit of a wild card in the situation, review anything major with an attorney ahead of time. Then you’ll at least know where you stand. My sister tends to run rogue, so I get how it flavors a lot of things.

I wouldn’t co-sign. You could gift cash - if she’d accept it - or buy something yourself and rent back to her (and make sure you don’t *need*the rent payment). If it so happens that she is going to be dependent on you, then take out a life insurance policy with her as the beneficiary. There are a lot of BH threads on these options.

Last comment: For mom’s budget, please be sure to consider everything - something fun for herself, medical expenses, gifts, lunch out with friends, all those little things that she may want to do. I’d hate to set up a situation where she can’t meet friends for a lunch date because the housing cost sucks up all her resources.
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