Before you put pen to paper and sign any documents here are some things to consider before consigning a mortgage loan for your child.
According to the National Association of Home Builders, in the second quarter of
2022, housing affordability fell to its lowest point since the 2007-09 recession. One
option to improve affordability is to have willing parents cosign the mortgage.
A recent Wall Street Journal article reported that 57% of parents would be willing to
cosign their child’s mortgage and 7% had done so in the past. Parents with a
household income of $100K may be set to do this, but parents close to retirement
and a fixed income have the additional risk of undermining their lifestyle or retirement
plans if they have to make payments because their child loses their job or becomes
unable to work.
Consider a one-time gift
Become a Guarantor (have responsibility only if child defaults)
Co-invest in the property
Pledge eligible securities to make a cash down payment, such as with Merrill
Lynch’s “Parent Power” plan