Mother is looking to refinance and asking me to co-sign

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max79
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Mother is looking to refinance and asking me to co-sign

Post by max79 »

My parents divorced years ago and my mom ended up with the house and the equity in it.

She had a boyfriend that was living with her helping with the mortgage until recently. She applied for a refinance to lower her payment as her current interest rate is significantly higher at over 6% than what is being offered these days. Apparently the lower payment would be at least several hundred less per month (not sure how much exactly) and give her enough to pay off her credit card debt.

She is 62 and collecting social security but not a whole lot since all of her jobs were part time and she never worked full time. She has a couple of house cleaning jobs to bring in extra income.

She asked me if I would be willing to cosign. I am thinking this would be a bad idea.

She has mentioned getting a reverse mortgage if she cannot qualify for a refinance or get a co signer.

While I did not ask for details, it seems that her monthly income is less than her monthly bills now.

Co-signing seems like a bad idea. My parents did pay for my first two years of college as I went to a commuter campus and lived at home during that time so I feel obligated to help in some way (hopefully without enabling her not to take steps to better her own situation).

She has not been in the workforce for almost 15 years and does not want to get a job because of covid, masks, etc. She is open to taking on additional side work however.

How can I help without risking my own financial situation?

--------------

Edit (5/18/21)

Here is some additional information that I was able to gather.

House is worth 280-300K, perhaps 330-350k with the crazy real estate market. Furnace and AC is fairly new. Roof will need to be replaced soon.

Not quite sure what she owes. I think 70-80k would be a ballpark figure. No idea how much the credit card balance is, however.

I am not sure exactly what her mortgage payment is. If I am remembering correctly from what my dad once said, it is around 800 per month. After crunching some numbets, this seems about accurate. This is about the same price one can rent a studio apartment in the area. The wage from her side job covers the mortgage.

There are 10 years left on the mortgage.

She has thought about downsizing. She has no interest whatsoever living in an apartment or condo. Not really much interest in moving unless it is out of the area.

Doesn't want a roomate. Has storage space she might be willing to rent out.

A part time job is an option but there are some physical limitations (i.e. bad back). There is also the virus and mask thing. She is workng on making additional income via buying and selling stuff online. Not sure how much she can expect from that however.
Last edited by max79 on Tue May 18, 2021 11:12 am, edited 1 time in total.
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ResearchMed
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Re: Mother is looking to refinance and asking me to co-sign

Post by ResearchMed »

Was she married (to the same person) for at least 10 years?
If so, she may quaify for spousal SS income, which may be more than her own benefits if she doesn't have a full employment history,

And correct, do not co-sign. Too many actual or possible down-sides.

The credit card debt... is she still charging to the cards...??

ETA: As an aside, I find it rather remarkable that she is asking you to co-sign but won't share her financial details... After all, YOU could be left on the hook.

RM
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Stinky
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Re: Mother is looking to refinance and asking me to co-sign

Post by Stinky »

Do not co-sign.

It sounds like your mother may be in a more expensive house than she can maintain for the long term. She may need to sell and downsize.
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max79
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Re: Mother is looking to refinance and asking me to co-sign

Post by max79 »

ResearchMed wrote: Wed May 12, 2021 11:12 am Was she married (to the same person) for at least 10 years?[
Yes to my father.
ResearchMed wrote: Wed May 12, 2021 11:12 amIf so, she may quaify for spousal SS income, which may be more than her own benefits if she doesn't have a full employment history,
She may be getting that but I will have to ask her.
ResearchMed wrote: Wed May 12, 2021 11:12 am And correct, do not co-sign. Too many actual or possible down-sides.

The credit card debt... is she still charging to the cards...??

RM
I think she is but do not know for sure.

I tend not not want to pry into others finances bit she is asking me to co-sign so I guess those are fair questions.
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Re: Mother is looking to refinance and asking me to co-sign

Post by RickBoglehead »

No, no, 1,000 times no. Do not co-sign.
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cheese_breath
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Re: Mother is looking to refinance and asking me to co-sign

Post by cheese_breath »

Her income is less than her monthly expenses. She's demonstrating inflexibility in what jobs she will accept. Ergo, she can't afford the house.

She should sell it and rent. You can help her with the rent payments.
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max79
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Re: Mother is looking to refinance and asking me to co-sign

Post by max79 »

Stinky wrote: Wed May 12, 2021 11:16 am Do not co-sign.

It sounds like your mother may be in a more expensive house than she can maintain for the long term. She may need to sell and downsize.
That is what I have thought about suggesting. She could probably buy a smaller place and have it paid off with the equity she has in current house. Does not seem open to thay idea tbough and I would suspect she wluld choose a reverse mortgage over that since she is attached to the house.
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max79
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Re: Mother is looking to refinance and asking me to co-sign

Post by max79 »

cheese_breath wrote: Wed May 12, 2021 11:22 am Her income is less than her monthly expenses. She's demonstrating inflexibility in what jobs she will accept. Ergo, she can't afford the house.

She should sell it and rent. You can help her with the rent payments.
The thing is...her current mortgage is likely less than rent would be. She would likely be paying more per month to rent an apartment she would not like over a house that she does like.
HomeStretch
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Re: Mother is looking to refinance and asking me to co-sign

Post by HomeStretch »

+1 to not co-signing a mortgage. There is a reason why the lender is asking for a co-signer. You will be liable for the full amount of the mortgage with no rights to the asset (house) if you are not on the deed. It may prevent you from obtaining credit for your own home/credit card/business. If your mom pays late or the house is foreclosed, your credit score will suffer.

You are likely right that your mom’s income is not sufficient to cover her expenses. She can either increase her income (get a job, take more side jobs, take in a paying roommate) and/or lower her expenses (which could include selling the house and renting a smaller, more affordable place). When comparing rent v. own… House expenses include not only the mortgage but also insurance, taxes, repairs, higher utilities of more square footage. Where would your mom get the money for a major maintenance item like a new roof or furnace?

A reverse mortgage will only fill the gap between current income and expenses for so long. The gap will widen when your mom gives up her side jobs. Your mom is 62 and could live until age 95. It’s unlikely a reverse mortgage will fund the gap for 30 years.

If you do want to help your mom, consider offering a monthly stipend of $xx for a defined period of time to help bridge the time she will need to increase her income/reduce expenses. But, accept the fact that you may be forestalling the inevitable where the house may be foreclosed on in the future.
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Re: Mother is looking to refinance and asking me to co-sign

Post by mikejuss »

As someone with a mother who was in a similar situation, I highly recommend encouraging her to sell the house and rent an apartment.
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Fallible
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Re: Mother is looking to refinance and asking me to co-sign

Post by Fallible »

Agree with others here that you should not sign. Also, your mother should understand the risks to you if you co-sign and here are some of those risks:
The big downside to cosigning someones else's loan is that you agree to pay the mortgage if the primary borrower doesn't. It's very risky for your credit, and potentially your relationship with the borrower, to guarantee the loan. So, before you commit to helping your son, daughter, or other loved one by becoming a cosigner on a home mortgage loan, consider all of the pitfalls.
https://www.nolo.com/legal-encyclopedia ... -loan.html

I also think that no matter how you decide to help your mother financially, you do need to know her overall financial situation, e.g., some exact figures such as how much credit card debt, house equity, etc.
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MrBobcat
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Re: Mother is looking to refinance and asking me to co-sign

Post by MrBobcat »

max79 wrote: Wed May 12, 2021 11:37 am
cheese_breath wrote: Wed May 12, 2021 11:22 am Her income is less than her monthly expenses. She's demonstrating inflexibility in what jobs she will accept. Ergo, she can't afford the house.

She should sell it and rent. You can help her with the rent payments.
The thing is...her current mortgage is likely less than rent would be. She would likely be paying more per month to rent an apartment she would not like over a house that she does like.
Are there rent assisted apartments available?
almostretired1965
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Re: Mother is looking to refinance and asking me to co-sign

Post by almostretired1965 »

While I think you need to be careful, there may be a proverbial free lunch in there. I would use the opportunity to get your mom to open up about her finances and make sure she is on a sustainable path going forward. One way to mitigate the risk is to get her to put your name on the deed as part of the condition for cosigning the loan. Once you have a clearer picture of her finances,, you may even be able to convince her to sell, pay off the cc debt, invest the proceeds, and generate sufficient cashflow to stop working.

A lot of this will depend on your relationship with her and how much you trust her to stick to a plan, once it is agreed upon.

In hindsight one of my great regrets is that I did not offer nor attempt to manage my parent's savings and investments 20 years ealier. They were too proud to ask, and I did not want to interfere. If I had done so, their net worth would most likely be triple where they are now. They are fine nonetheless since they have always been very frugal, but they would have had a much more comfortable retirement while they were able to enjoy it.
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max79
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Re: Mother is looking to refinance and asking me to co-sign

Post by max79 »

HomeStretch wrote: Wed May 12, 2021 11:37 am +1 to not co-signing a mortgage. There is a reason why the lender is asking for a co-signer. You will be liable for the full amount of the mortgage with no rights to the asset (house) if you are not on the deed. It may prevent you from obtaining credit for your own home/credit card/business. If your mom pays late or the house is foreclosed, your credit score will suffer.
Good points. That is what I am aftaif of.
HomeStretch wrote: Wed May 12, 2021 11:37 am You are likely right that your mom’s income is not sufficient to cover her expenses. She can either increase her income (get a job, take more side jobs, take in a paying roommate) and/or lower her expenses (which could include selling the house and renting a smaller, more affordable place). When comparing rent v. own… House expenses include not only the mortgage but also insurance, taxes, repairs, higher utilities of more square footage. Where would your mom get the money for a major maintenance item like a new roof or furnace?
Good question. The roof will need to be replaced soon.
HomeStretch wrote: Wed May 12, 2021 11:37 am A reverse mortgage will only fill the gap between current income and expenses for so long. The gap will widen when your mom gives up her side jobs. Your mom is 62 and could live until age 95. It’s unlikely a reverse mortgage will fund the gap for 30 years.
I think she is expecting her inheritance to help with that but that may not be for some time.
HomeStretch wrote: Wed May 12, 2021 11:37 am If you do want to help your mom, consider offering a monthly stipend of $xx for a defined period of time to help bridge the time she will need to increase her income/reduce expenses. But, accept the fact that you may be forestalling the inevitable where the house may be foreclosed on in the future.
This seems like the best course of action. Or else give her a one time lump sum which could hold her over until she figures out her situation (sell house or increase her income). I would not want her to become dependent on that monthly stipend and would have to make it clear that there is a limited term.
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Tamarind
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Re: Mother is looking to refinance and asking me to co-sign

Post by Tamarind »

Don't ever sign your name to debt where you have no ownership of the asset securing it.
delamer
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Re: Mother is looking to refinance and asking me to co-sign

Post by delamer »

If you co-sign, it could limit your ability to obtain a mortgage or other loans for yourself.

The mortgage payment for your mother’s home will count against your debt-to-income ratio.

Not to mention that you’ll be fully responsible for the mortgage if your mother can’t make the payments.
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momvesting
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Re: Mother is looking to refinance and asking me to co-sign

Post by momvesting »

I would tell her that before you will even consider helping her, you need to go through all the accounts and set up a working budget. Even if she were able to refinance on her own, just taking cash and throwing it at credit cards is not a plan. She needs to have a firm budget using actual income, the new mortgage payment, actual expenses for her other services and utilities, a reasonable budget for gas, food, clothes, etc. and then see if she can actually afford to stay in the house. I would not attempt any sort of help until that is done.
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Re: Mother is looking to refinance and asking me to co-sign

Post by chazas »

max79 wrote: Wed May 12, 2021 11:19 amI tend not not want to pry into others finances bit she is asking me to co-sign so I guess those are fair questions.
You have the right to know everything about her financial condition if she wants that.

I found this to be a pretty good shield against a financially difficult parent who wanted me to keep "lending" them money. I finally said, I need you to completely open the kimono and show me everything so I can evaluate not only the credit risk but how I can help you do better.

That ended the conversation in its tracks.
finite_difference
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Re: Mother is looking to refinance and asking me to co-sign

Post by finite_difference »

My mother brought me into this world. Without her, what would I have? You are very lucky your mom is still alive. I wish mine was.

In my opinion we have an obligation to help others, starting with our family, but within our own means. Within our own means doesn’t mean it will be 100% comfortable, but won’t involve too much sacrifice. I personally don’t want to live in a world where parents don’t help their kids and kids don’t help their parents. The only thing I can do is to not create that world. That’s why I participate in this site.

If it’s a decent house, and if you add your name to the title together with your mom’s, and refinance to a 30-year fixed price mortgage at 3%, can she afford to live there off of social security alone?

Otherwise can she sell the house and move into an apartment that’s affordable, or can she move in with you?

She’ll need to be willing to let your pry into her financials. That’s only fair. You’re family. A lack of transparency usually doesn’t help anyone when it comes to many financial matters.
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WillRetire
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Re: Mother is looking to refinance and asking me to co-sign

Post by WillRetire »

Best not to ask her for more information about her finances to help you decide whether to co-sign. Answer to co-signing is NO. Period. No matter what her financial picture is.

She may qualify for the new loan by herself, but the loan officer wants to reduce the bank's risk. (Can you blame them?)

Offering to help her out with $x per month for a specified period... that's up to you but emphasize it is for a limited time and while you are able. What if you lose your job? Or get sick or injured? Or someone close to you gets sick or injured?

A one-time gift is better.

Another more ambitious option: buy a condo for her to live in, one that you like as an investment, and charge her rent.

Maybe introduce her to Dave Ramsey's talks. He is a great motivational speaker for people who live above their means.
runninginvestor
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Re: Mother is looking to refinance and asking me to co-sign

Post by runninginvestor »

max79 wrote: Wed May 12, 2021 11:37 am
cheese_breath wrote: Wed May 12, 2021 11:22 am Her income is less than her monthly expenses. She's demonstrating inflexibility in what jobs she will accept. Ergo, she can't afford the house.

She should sell it and rent. You can help her with the rent payments.
The thing is...her current mortgage is likely less than rent would be. She would likely be paying more per month to rent an apartment she would not like over a house that she does like.
That may be the case, but the equity received from the sale of the house may be enough or more to cover that difference for a substantial period of time.

For example if she is paying $1,000 a month right now for a mortgage, but rent in the area is $1500 a month; a $500 shortfall.

If she were to sell and get back $100,000 in equity, $100,000/$500=200 months (16 years) of payments (ignoring rent inflation, potential investment gains for the example).
GT99
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Re: Mother is looking to refinance and asking me to co-sign

Post by GT99 »

finite_difference wrote: Wed May 12, 2021 1:07 pm My mother brought me into this world. Without her, what would I have? You are very lucky your mom is still alive. I wish mine was.

In my opinion we have an obligation to help others, starting with our family, but within our own means. Within our own means doesn’t mean it will be 100% comfortable, but won’t involve too much sacrifice. I personally don’t want to live in a world where parents don’t help their kids and kids don’t help their parents. The only thing I can do is to not create that world. That’s why I participate in this site.

If it’s a decent house, and if you add your name to the title together with your mom’s, and refinance to a 30-year fixed price mortgage at 3%, can she afford to live there off of social security alone?

Otherwise can she sell the house and move into an apartment that’s affordable, or can she move in with you?

She’ll need to be willing to let your pry into her financials. That’s only fair. You’re family. A lack of transparency usually doesn’t help anyone when it comes to many financial matters.
I largely agree here. I wouldn't make it a blanket "no, don't cosign" but you have to be on the title of the house and she has to give you full visibility into her finances. Without those two things, no deal.

The simple reality is that she's in a tough financial spot. She needs to take responsibility for that and take actions to get herself back on track. And hte best course of action is likely selling the house and/or getting a new job.

My in-laws used to be very wealthy, and they unfortunately rode their family business from very successful until it was basically nothing and they were nearly broke from trying to save it. They sold their expensive house and downsized and both went back to work in relatively low paying jobs in their late 50s. While they are still bad with money (i.e. they're not saving as much as they should and will likely be working until their mid 70s), they took responsibility and action, and they at least live a fairly comfortable life and aren't racking up debt.
Point
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Re: Mother is looking to refinance and asking me to co-sign

Post by Point »

Your mother is the one that should be in this forum explaining her finances in detail and coming up with a plan to assess her current debt, her needed capital outlays, and her income and expenses moving forward. Until she takes responsibility for her current situation her financial life won’t improve, with or without your assistance. However, yours will not improve if you assist her before she solves the fundamental issues. Having a boyfriend living with her temporarily put off the need to do this.

She is breaking rule #1: never be a burden on your kids.
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celia
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Re: Mother is looking to refinance and asking me to co-sign

Post by celia »

I didn’t notice anything about how much time is left on that 6% mortgage and if it is the original mortgage she had with her ex. If it only has a few years on it, grin and bear it (with yor help).

If she has re-financed a few times, that will likely keep happening, so don’t get involved.

Another possibility, if you can afford it, is to pay off the balance in exchange for a new “mortgage” from you, that is recorded with the county. This will ensure you would get your money back before it is sold, even if you should die. Check with a real estate lawyer to generate the proper paperwork, if you are interested in this option.
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Re: Mother is looking to refinance and asking me to co-sign

Post by mhalley »

Personal finance is personal. While the rule of thumb is never co-sign, helping out your mother would be a great thing. I would consider it under these conditions:
1. Complete review of her finances, and evaluation reveals she is able to make the payments.
2. You make the payments, she pays you.
3. She leaves you the house in her will (this is not set in stone imho).
4. You have the financial means to make the payments should she not be able to.
5. You are convinced it would not ruin your relationship should she not be able to pay.
6. You have no plans to move/refinance your own mortgage in the next few years
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8foot7
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Re: Mother is looking to refinance and asking me to co-sign

Post by 8foot7 »

finite_difference wrote: Wed May 12, 2021 1:07 pm My mother brought me into this world. Without her, what would I have? You are very lucky your mom is still alive. I wish mine was.

In my opinion we have an obligation to help others, starting with our family, but within our own means. Within our own means doesn’t mean it will be 100% comfortable, but won’t involve too much sacrifice. I personally don’t want to live in a world where parents don’t help their kids and kids don’t help their parents. The only thing I can do is to not create that world. That’s why I participate in this site.

If it’s a decent house, and if you add your name to the title together with your mom’s, and refinance to a 30-year fixed price mortgage at 3%, can she afford to live there off of social security alone?

Otherwise can she sell the house and move into an apartment that’s affordable, or can she move in with you?

She’ll need to be willing to let your pry into her financials. That’s only fair. You’re family. A lack of transparency usually doesn’t help anyone when it comes to many financial matters.
This. There are very few people I'd cosign for, but my mother and father and children are among them, assuming there was (a) a good reason the bank needs a co-signer and (b) there was full disclosure around the financials, both now and ongoing.

I can easily believe a mortgage payment at a low interest rate with some equity would be cheaper than rent these days. I'd at the very least look into what the deal would entail.

What may be an alternative choice is her selling the house to you and becoming a renter to you. Then if she can't pay, she moves, you sell.
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Re: Mother is looking to refinance and asking me to co-sign

Post by Nebraska_Drought »

I guess it comes down to how comfortable you are with your own finances to want to provide any "help" to her situation? I am all for helping people, but as others stated, you need to have a full disclosure of current finances and debt (like from a current credit report) before you even consider and even then, you would need to insist on being on the title.

Blanket statements about any obligation to providing help made by some responses are just not correct. "Loaning" money to family is pretty much giving it away, you probably will never see it again. Just as you were not part of her being in the financial situation she is in, you are also not responsible for fixing it. I personally will never feel an obligation to fix someone else's mess as I had no say in how it got that way and I don't want to sidetrack my own path to FI.

The other "Red Flag" is her unwillingness to work. At her age and financial situation, that absolutely has to be an option (full time job outside of the house) as without that, it really, really makes deciding all of this more difficult. Not knowing the existing term of the mortgage, she may be able to work the next 8 years (to 70) and have the house paid off and some extra savings in the bank too. There are so many jobs available right now, it is unfathomable that working is not one of her solutions.
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Re: Mother is looking to refinance and asking me to co-sign

Post by eye.surgeon »

I don't know what you should do but I can tell you what I would do. Buy the house myself and rent it back to her. The equity should help her pay the rent, and if she can't swing market value rent I will take what she can afford. And I'm not doing that because it's financially smart, but because she's my mom. And it's better than co-signing her mortgage.
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Wellfleet
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Re: Mother is looking to refinance and asking me to co-sign

Post by Wellfleet »

max79 wrote: Wed May 12, 2021 11:05 am
Co-signing seems like a bad idea. My parents did pay for my first two years of college as I went to a commuter campus and lived at home during that time so I feel obligated to help in some way (hopefully without enabling her not to take steps to better her own situation).

She has not been in the workforce for almost 15 years and does not want to get a job because of covid, masks, etc. She is open to taking on additional side work however.

How can I help without risking my own financial situation?
Have family in a similar-ish situation. You can't risk your financial situation to help. My offer to my family is to pay bills directly to creditors/send food directly via instacart but they often just want cash to blow so I end up paying no bills after all.
260chrisb
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Re: Mother is looking to refinance and asking me to co-sign

Post by 260chrisb »

Repeat after me: never co-sign ever!
DidItMyWay
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Re: Mother is looking to refinance and asking me to co-sign

Post by DidItMyWay »

I agree that you should definitely not co-sign.
Others may disagree, but one of my personal financial rules is to never, ever co-sign for anyone.

Do you have siblings?
If so, maybe the siblings and you can get together and give a one time gift of some $ to "tide her over until she can get a job". If you don't have siblings but you are financially doing fine yourself (no debt, adequate emergency fund, etc.) and feel inclined to help her, you could give her a one time gift of some $ to "tide her over until she can get a job". If you don't feel like you want to do that, I would try to encourage her to sell her house and buy (or rent) a place that she can afford on her own rather than taking a reverse mortgage.

Good luck!
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Taylor Larimore
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Re: Mother is looking to refinance and asking me to co-sign

Post by Taylor Larimore »

Max79:

Copy this entire conversation for your mother. It is full of valuable information and suggestions about her dilemma (and yours).

Best wishes.
Taylor
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rascott
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Re: Mother is looking to refinance and asking me to co-sign

Post by rascott »

Taylor Larimore wrote: Wed May 12, 2021 2:32 pm Max79:

Copy this entire conversation for your mother. It is full of valuable information and suggestions about her dilemma (and yours).

Best wishes.
Taylor
"Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery." --Charles Dickens

Great advice Taylor.
DoubleComma
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Re: Mother is looking to refinance and asking me to co-sign

Post by DoubleComma »

eye.surgeon wrote: Wed May 12, 2021 2:13 pm I don't know what you should do but I can tell you what I would do. Buy the house myself and rent it back to her. The equity should help her pay the rent, and if she can't swing market value rent I will take what she can afford. And I'm not doing that because it's financially smart, but because she's my mom. And it's better than co-signing her mortgage.
This is exactly what I would do, and exactly the reason.

All the BHs here will say this is a poor financial decision and they are right....but she is YOUR mom, not theirs.

DW & I as well as her sister and husband offered to do this for their mom. She was renting, really wanted to own, we wanted he to have a more fixed living expense and thought this was the best way to do it. Ultimately she didn't want us to buy her a home, so we agreed that each of us would gift her the annual IRS limit at Christmas and then again in the new year so she could have an even lower mortgage and lower cost. We are all happy with the outcome...just hope she doesn't have a fling and get married to a younger man who might end up with the house :o It was worth the gamble to see her secure.
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Re: Mother is looking to refinance and asking me to co-sign

Post by dukeblue219 »

Sometimes poor financial decisions are good family decisions. Only you know whether she is the type to pay off the mortgage dutifully or the type to leave you with the balance. Contrary to public opinion, most co-signed loans work out just fine. Probably the vast majority. It's not an unreasonable thing to do to help Mom keep her house. Now, if it's a five bed room four bath thing, downsizing would be prudent, but if the house is reasonable and cheaper than renting, I don't see an issue here if you trust your mother.

6% is awful in an era where sub-3% is common. The savings might be substantial.
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JoeRetire
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Re: Mother is looking to refinance and asking me to co-sign

Post by JoeRetire »

max79 wrote: Wed May 12, 2021 11:05 am She asked me if I would be willing to cosign. I am thinking this would be a bad idea.
I am thinking you are correct.
While I did not ask for details, it seems that her monthly income is less than her monthly bills now.
It seems bad.
How can I help without risking my own financial situation?
Encourage her to learn to live within her means. That's the best way to help her long term.
Agree to help her find ways to cut expenses.
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Mlm
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Re: Mother is looking to refinance and asking me to co-sign

Post by Mlm »

If it were me I would never co-sign. I would offer to look over her financial situation and offer possible solutions. In the end she is going to do what she wants to do.
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freckles01
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Re: Mother is looking to refinance and asking me to co-sign

Post by freckles01 »

OP, can she rent out a room or two to bring in extra income?

Tenants can help cover the mortgage and maintenance costs without you having to co-sign.
hudson
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Re: Mother is looking to refinance and asking me to co-sign

Post by hudson »

max79 wrote: Wed May 12, 2021 11:05 am How can I help without risking my own financial situation?
If I was in your shoes, I would humbly and politely request full disclosure.
Without full disclosure, you don't have enough information.
I would want to outline her current financial situation in detail on a piece of paper or two.
I would want to see all documentation including the deed to the house.
I would study the above and try to define the problem.
When you see it all outlined on a piece of paper, it might be easier to figure out what you can do.
It looks like the parent-child roles are reversing.
Last edited by hudson on Wed May 12, 2021 6:41 pm, edited 3 times in total.
Zillions
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Re: Mother is looking to refinance and asking me to co-sign

Post by Zillions »

max79 wrote: Wed May 12, 2021 11:05 am My parents divorced years ago and my mom ended up with the house and the equity in it.

She had a boyfriend that was living with her helping with the mortgage until recently. She applied for a refinance to lower her payment as her current interest rate is significantly higher at over 6% than what is being offered these days. Apparently the lower payment would be at least several hundred less per month (not sure how much exactly) and give her enough to pay off her credit card debt.

She is 62 and collecting social security but not a whole lot since all of her jobs were part time and she never worked full time. She has a couple of house cleaning jobs to bring in extra income.

She asked me if I would be willing to cosign. I am thinking this would be a bad idea.

She has mentioned getting a reverse mortgage if she cannot qualify for a refinance or get a co signer.

While I did not ask for details, it seems that her monthly income is less than her monthly bills now.

Co-signing seems like a bad idea. My parents did pay for my first two years of college as I went to a commuter campus and lived at home during that time so I feel obligated to help in some way (hopefully without enabling her not to take steps to better her own situation).

She has not been in the workforce for almost 15 years and does not want to get a job because of covid, masks, etc. She is open to taking on additional side work however.

How can I help without risking my own financial situation?
Never ever co-sign for ANYONE unless you're willing and able to accepr the risk that you could end up paying for that debt.

Decades ago, a coworker managed to convince me to cosign on a personal loan for him. Spun a yarn about his aging mother's medical bills and his sister not being able to afford textbooks for college etc.

I'm still mad at myself and bitter about it to this day. Don't do it.

It she cannot get a loan to stay in her home, then she cannot afford the home, period. Help her to sell it and move into a home that she *CAN* afford and which wouldn't potentially end up costing the two of you a good parent - adult child relationship.

Good luck!
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Re: Mother is looking to refinance and asking me to co-sign

Post by cchrissyy »

you know, if you cosign you are on the hook for the whole balance, no matter if she pays or not and no matter that you aren't even an owner on the deed.

if the need was there and my personal situation was strong enough, i can imagine helping a parent pay their bills. i can imagine buying a place for them to live for free or reduced cost. i cannot imagine ever cosigning for anyone for anything. no no no.
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ArtsyProf
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Re: Mother is looking to refinance and asking me to co-sign

Post by ArtsyProf »

Find a way to help your mother out! It might be that you buy a smaller cheaper condo for her to live in, for example, or a at low cost rental for seniors that she qualifies for… Or if you do cosign, which does make sense in order to reduce hrr monthly Costs, make sure you're on the deed…
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max79
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Re: Mother is looking to refinance and asking me to co-sign

Post by max79 »

Thanks all for the responses and ideas.

There are a number of options:

- Co-signing which I have all but ruled out (unless my name is on the deed but even then not a good idea). My brother may not like that too much though.

- Give her a monthly stipend for a linited time. This would buy her time so she can figure out a way to increase her income or cut her expenses. Only problem is that she may become dependent on that and expect it indefinitely.

- Give her a one-time gift to buy her some time. I think I like this idea better than a monthly stipend if I make it clear it is a one time thing. The ball would then be in her court to take action (generate income or sell house) and there would be a hard deadline.

- Buy another house and rent it to her. The problem is that she likely would not like it as much as current house. I could be stuck with the mortgage if she defaults on her rent.

- She sells her house and either buys a smaller house or rents.

- She rents out a room in her house or brings in a roommate. Not sure how feasible this is.

- I buy her house and rent it to her. I could swing this....if I sold my current house. Even if I were to come up with a down payment, the mortgage would likely exceed what she could afford to pay for rent.

- Move out of my current house and rent it to her. I have thought about moving to an area with a better job market. My house is a lot smaller though.

- Pay off her mortgage balance and I replace the mortgage company. Depending on what her balance is, I would likely have to get my own loan. If the numbers work for me, this could be a feasible option. Would I be able to get a lien on the house in case she were to default? Not that I would repo it but this would make it clear that this is what is owed to me in case she sells.

There does not seem to be much fanfare for the reverse mortgage here. One poster brought up that there would not be enough equity to last 30 years. Howver she would likely collect on an inheritance before then.

I could see her stobbornly refusing to move unless all options are exhausted. She would not want to live in an apartment and I could see her going for the reverse mortgage option to prevent that.

If she needs my help, I will definitely need more details on her financial situatiin - how much is left on current mortgage, credit card debt, montly income vs expenses, monthly mortgage payment, and what she was hoping to pay if her refi was approved.
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Watty
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Re: Mother is looking to refinance and asking me to co-sign

Post by Watty »

One thing to be aware of if you cosign a for her mortgage then if you ever need to get a mortgage of your own then your lender will look at the cosigned loan as being part of your debt and you may not be able to qualify for a mortgage.

This can prevent you from being able to refinance to get a better rate or move if you want to.
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max79
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Re: Mother is looking to refinance and asking me to co-sign

Post by max79 »

finite_difference wrote: Wed May 12, 2021 1:07 pm If it’s a decent house, and if you add your name to the title together with your mom’s, and refinance to a 30-year fixed price mortgage at 3%, can she afford to live there off of social security alone?
Not sure. I will need to obtain more information.

finite_difference wrote: Wed May 12, 2021 1:07 pmOtherwise can she sell the house and move into an apartment that’s affordable, or can she move in with you?
I couldn't see her moving into an apartment unless there was no other option. I don't have the room in my house as there is bit much space.
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max79
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Re: Mother is looking to refinance and asking me to co-sign

Post by max79 »

runninginvestor wrote: Wed May 12, 2021 1:19 pm
max79 wrote: Wed May 12, 2021 11:37 am
cheese_breath wrote: Wed May 12, 2021 11:22 am Her income is less than her monthly expenses. She's demonstrating inflexibility in what jobs she will accept. Ergo, she can't afford the house.

She should sell it and rent. You can help her with the rent payments.
The thing is...her current mortgage is likely less than rent would be. She would likely be paying more per month to rent an apartment she would not like over a house that she does like.
That may be the case, but the equity received from the sale of the house may be enough or more to cover that difference for a substantial period of time.

For example if she is paying $1,000 a month right now for a mortgage, but rent in the area is $1500 a month; a $500 shortfall.

If she were to sell and get back $100,000 in equity, $100,000/$500=200 months (16 years) of payments (ignoring rent inflation, potential investment gains for the example).
It makes perfect sense to me. However when there is an emotional attachment to a house or car or anything like that, that tends to affect one's judgment. Many see renting as "throwing money away" and I believe she would think along thise same lines.
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cheese_breath
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Re: Mother is looking to refinance and asking me to co-sign

Post by cheese_breath »

Before you go very far on the 'buy more time' options you and she need to develop a plan together for solving the problem. Otherwise she might end up in the same situation as she is now when the 'buy more time' money runs out.
The surest way to know the future is when it becomes the past.
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cheese_breath
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Re: Mother is looking to refinance and asking me to co-sign

Post by cheese_breath »

max79 wrote: Wed May 12, 2021 11:35 pm
runninginvestor wrote: Wed May 12, 2021 1:19 pm
max79 wrote: Wed May 12, 2021 11:37 am
cheese_breath wrote: Wed May 12, 2021 11:22 am Her income is less than her monthly expenses. She's demonstrating inflexibility in what jobs she will accept. Ergo, she can't afford the house.

She should sell it and rent. You can help her with the rent payments.
The thing is...her current mortgage is likely less than rent would be. She would likely be paying more per month to rent an apartment she would not like over a house that she does like.
That may be the case, but the equity received from the sale of the house may be enough or more to cover that difference for a substantial period of time.

For example if she is paying $1,000 a month right now for a mortgage, but rent in the area is $1500 a month; a $500 shortfall.

If she were to sell and get back $100,000 in equity, $100,000/$500=200 months (16 years) of payments (ignoring rent inflation, potential investment gains for the example).
It makes perfect sense to me. However when there is an emotional attachment to a house or car or anything like that, that tends to affect one's judgment. Many see renting as "throwing money away" and I believe she would think along thise same lines.
Then you'll just have to convince her otherwise. Deal with facts, not emotions.
The surest way to know the future is when it becomes the past.
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max79
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Re: Mother is looking to refinance and asking me to co-sign

Post by max79 »

Point wrote: Wed May 12, 2021 1:25 pm Your mother is the one that should be in this forum explaining her finances in detail and coming up with a plan to assess her current debt, her needed capital outlays, and her income and expenses moving forward. Until she takes responsibility for her current situation her financial life won’t improve, with or without your assistance. However, yours will not improve if you assist her before she solves the fundamental issues. Having a boyfriend living with her temporarily put off the need to do this.

She is breaking rule #1: never be a burden on your kids.
Agreed. She left the workforce years ago knowing that her boyfriend would assist with her finances. He later decided that he no longer wanted to work. They were not living extravagently but were getting by as they lived together.

When my parents were going through their divorce (she had already quit her job at this point), I had expressed concerns about finances. She said she would never ask me for a penny....and here we are.
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cheese_breath
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Re: Mother is looking to refinance and asking me to co-sign

Post by cheese_breath »

max79 wrote: Wed May 12, 2021 11:43 pm
Point wrote: Wed May 12, 2021 1:25 pm Your mother is the one that should be in this forum explaining her finances in detail and coming up with a plan to assess her current debt, her needed capital outlays, and her income and expenses moving forward. Until she takes responsibility for her current situation her financial life won’t improve, with or without your assistance. However, yours will not improve if you assist her before she solves the fundamental issues. Having a boyfriend living with her temporarily put off the need to do this.

She is breaking rule #1: never be a burden on your kids.
Agreed. She left the workforce years ago knowing that her boyfriend would assist with her finances. He later decided that he no longer wanted to work. They were not living extravagently but were getting by as they lived together.

When my parents were going through their divorce (she had already quit her job at this point), I had expressed concerns about finances. She said she would never ask me for a penny....and here we are.
She hasn't asked for a penny... yet. She probably thinks everything will be OK if she can reduce the mortgage payment. Maybe it will, maybe it won't.
The surest way to know the future is when it becomes the past.
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