The Pros and Cons of Cosigning a Mortgage | Buying a Home In Boca Raton

the pros and cons of cosigning a mortgage

As you age and grow wealthier, you may have children or a special someone in your life you'd like to share your prosperity. Oftentimes this can lead to considerable financial risk on behalf of both parties, but co-signing is nonetheless one of the most potent and impactful ways you can benefit another person. When co-signing a mortgage, you are likely taking one of the biggest financial risks of your life. For such a risk and little reward, you should be certain you are very close to, and trust your co-signee. For our part, we're drawing from our experience and discourse with our partners at Supreme Lending to learn what cons and pros (if any) there are to co-sign a mortgage.

the pros of cosigning a mortgage

Pro: The Spirit Of Giving

Admittedly, there are few pros to co-signing a mortgage for someone else. Very rarely does it lead to a financial boon for the secondary signer, and more than often is a lateral move made out of good faith. Considering student loans still loom large and younger people are facing economic circumstances unique to themselves, its incumbent on the prior generation to support its younger people as they seek the benefits of homeownership. Obviously, no personal relationship should be transcended by money, but co-signing a major investment such as a home loan can lead to great potential for the strain or dissolution of a relationship. Co-sign wisely and recognize the incredible benefit you're bringing to the life of someone we can only image you trust, love, and respect enough to sign for.

Pro: Increased Options For Primary Borrower

A home loan is a major financial vehicle that requires good credit and existing assets to obtain. Without an abundance of either, secondary investments such as car loans, savings accounts, or future refinancing will be a lofty but distant goal for the primary borrower. While locked perilously into a long-term expense, the primary borrower may have need for additional investments that they can afford, but may be unable to obtain without the shared burden over the mortgage. In short, but co-signing, you are increasing the mobility and vertical capabilities of your fortunate signee.

cons of cosigning mortgage

Con: You Could Stuck With The Loan

And now, for the longer, and admittedly more concrete list of "cons." The first is, of course, the risk of taking on the loan yourself. If your cosigner can't pay, loses their income, gets hurt, or worse - you could be on the hook for the mortgage. Make sure both you and your co-signee have plenty of flexion for the inevitabilities of life. If you don't have surplus cash, and your signer doesn't have income and savings well in excess of the bare minimum needed, it is highly advisable not to co-sign for that person.

Con: You Risk Your Credit

Your credit is the next thing at risk. If you can't pay the burden left on your plate, your credit will suffer. This is the second in our four-tiered pile of potential disasters. If you can't pay, your credit is next. The risk to your credit is as significant as it is to your cosigner.

Con: You Risk Your Relationship

As sad as it is, financial circumstances and unpaid debts are often the impetus for the dissolution of a friendship, sibling or even romantic relationship. This is the third tier in the destructive circumstances that may befall the unfortunate recipient of someone else's mortgage. Unless you're a remarkably wealthy, or incredibly forgiving individual, a delinquent cosignee could be one of the worst associations one can make, especially if you sign on the dotted line. Your relationship with this person could be strained, or permanently destroyed from such a financial burden.

Con: The Lender Could File Suit Against You

Last but not least, the icing on the cake - the veritable cherry on top. Imagine tolerating the burden of a mortgage, credit damage, and a frayed relationship, only to be served by the sender. This might be the final straw on an otherwise forgiving person's back. If not for the above three cons, the litigious action that somehow seems to reach you at the worst possible time will be just what you (sarcastically) need to add insult to injury.

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