(Closed) Mortgage Guarantor: Disadvantages/Advantages

posted 5 years ago in Home
Post # 3
Member
1133 posts
Bumble bee
  • Wedding: January 2010

@Arganique:  

Are there any financial risks involved?.Is it difficult to get a second mortgage (both sides of our parents have excellent credit and financial history). YES, there are lots and lots of financial risks involved. If your parents take out a 2nd mortgage to cover your new home, they are basically guaranteeing that you will make all of your payments, and if you can’t, they will be responsible for covering the debt, either by taking over the payments or by the bank foreclosing on their assets to cover the loan.

What if you or your Darling Husband get sick or loose your job? What if the economy turns sour again and property values plunge and now both you and your parents are underwater on both houses? What if your parents get sick and need to take a loan against their house to pay medical bills? It could ruin all of your financial futures, put their retirement in jeopardy, and possibly leave you both homeless.

Additionally, this will count as a hit against their credit. So if they want to buy a new car, or if they need money in the future and want to get a home equity loan, they may not qualify or will need to pay higher rates to get financing.

This is a BAD, BAD, BAD idea.

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What is the minimum downpayment required for a second mortgage?.How would the parents’ taxes be affected? How would ours? All of the financials depend on how much equity your parents have in their home right now. If their house is paid off and worth $500,000, technically they could get a second mortgage for around $400,000. If they still owe money on the property, it is determined by a ratio of loan-to-value.

Their taxes would not be effected. Only their credit score and their future potential of securing any type of financing for themselves.

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How simple is it to transfer the ownership to our name in the long run? Or would it have to be an official “sale”? Varies from state to state. Only a real estate professional in your state could answer this question.

If you can’t already tell, I am VERY against this. Please wait until you are financially independent enough to afford a home on your own without your parents putting themselves in jeopardy.

Post # 4
Member
6015 posts
Bee Keeper
  • Wedding: March 2012

@ExcitedScaredBee:  +1

Yeah this is a bad bad idea.  A friend of mine conned her parents into doing this.  Her and her husband are getting divorced and the whole thing is a nightmare.  She doesn’t make enough to cover the whole payment and he’s living with someone else.  Her parent’s areNOT kids, I mean this could ruin them and at their age there isn’t time to rebuild. 

ETA: Maybe you could live with your parents or his to save up money faster and straighten out your own credit histories

Post # 5
Member
8453 posts
Bumble Beekeeper
  • Wedding: April 2013

@ExcitedScaredBee:  +1

As other bees said, BAD BAD BAD idea. 

Post # 6
Member
10572 posts
Sugar Beekeeper
  • Wedding: January 2011

I know some people where their parents bought a condo and they paid rent while in a school.  It’s a bit different, but still similar and it worked out.  The parents owned the condo though.

The big question here (to ask yourself, not share unless you want to) is why you can’t get a mortgage on your own.  If it’s all because something major happened like a business failure or medical emergency or something and you don’t have a bunch of debt anymore than I would look into a bit more.  If it’s something else though, there could be a very good reason why a lender won’t trust you, and it might not be a good idea for you to be owing anyone such a large sum of money.

Renting isn’t throwing your money away.  It’s paying for shelter.  Money has to be put into a house as well that you won’t get back when it’s time to sell.

Post # 7
Member
7311 posts
Busy Beekeeper
  • Wedding: October 2011 - Bed & Breakfast

I agree with PP…. renting is NOT throwing away money. It’s paying to have a roof over your head and someone to fix all of the headaches that come with being a home owner.Are you honestly willing to tie up hundreds of thousand of dollars of your parent’s credit, dollars that they will no longer be able to tap into themselves should they need it, just because you don’t want to rent and you want them to take the financial risk for you?

Rent until you can get a mortgage on your own. An alternative could be to have your parents buy the house in their names only as an investment property (if it is a really good investment opportunity in a highly desirable and marketable area) and pay them rent until you can get a mortgage to buy it from them, or buy a new place on your own and they can continue to be landlords to new renters.

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