There are several circumstances that require co-signing for a mortgage. The most common scenario involves a married couple. The two incomes combine to sufficiently cover the cost of the monthly mortgage payment. Other cases include parents co-signing for their child’s first home; adult children co-signing for their aging parents whose income has diminished at retirement; siblings or friends helping each other out. The fact is, most people with good credit and assets can co-sign for someone else. Whether the co-signer feels a familial obligation or they just want to help someone, the question remains: Is the risk worth the reward?
Let’s look at that married couple. What happens if they divorce in a few years and the wife remains in the home? While she has now taken over paying the mortgage, her ex-husband’s credit is still at risk, even though he is not making the payments. If she is late with her payment or defaults on it, they will equally share in the liability. There is an option to refinance, but what happens if the ex-wife does not qualify on her own? The ex-husband may choose to keep his name on the mortgage, especially when children are involved.
In the case of friends or family co-signing, it is important to understand that what began as an act of kindness can quickly turn into a regrettable decision. When it comes to your hard-earned credit, you must consider the history as well as the potential of the person you’re signing for: Why is their credit low? Do they have a stable job history? Will their income increase over time? Do you trust that this person with poor credit and/or limited assets will take on and consistently pay a monthly loan over 15 or 30 years?
Worst case scenario: As the co-signer, you are responsible for the loan if the homeowner defaults on the payment. If you already have a mortgage of your own to pay, you now have two. In addition, because the homeowner defaulted on the payment, your credit has taken a hit in the process.
None of this is meant to say that all co-signed mortgages are a mistake. Many of them work out perfectly with no issues. The point here is understand your responsibilities as a co-signer and if you choose to proceed, be ready to take on the full responsibility of the mortgage.
If you are recently divorced and need information about refinancing or if you have further questions about co-signing for a mortgage, please contact me at 617-965-1236 or email me.
April’s Home Library Improver
Marijuana: The Unbiased Truth About The World’s Most Popular Weed by Kevin P. Hill, M.D.
One of the more memorable acceptance speeches delivered at this year’s Academy Awards was from Best Supporting Actress, Patricia Arquette. Her remarks about gender equality and the pay gap between men and women struck a chord that lasted beyond the show, and she recently spoke at an event sponsored by the United Nations on the same topic.
In 2015, it is shocking — though not surprising to some — that women would be paid less for doing the same job as men. Yes, times are changing but perhaps not fast enough in this case. Ms. Arquette made the comment that change starts with women.
I mention this because of a Boston Globe article written recently about how women lag behind men in financial literacy. This is another example where there should be gender equality. The gist of the article says that women scored lower than men in answering questions related to money and finances.
It also goes on to say that the women who were polled were more financially vulnerable than their male counterparts.
Whether or not a gender pay gap is a factor, the truth is that women today need to understand their finances as well as men for a number of reasons.
In the case of a divorce, a woman who may have relied on her husband now bears the full responsibility for her financial well-being.
Among married couples, we know that women tend to outlive their husbands and at some point they need to have a solid grasp of their financial situation.
Obviously there are many exceptions to the rule and plenty of women are both the breadwinner and the decision-maker of the family when it comes to finances. However, it is important that all women (and men, too!) learn and understand how their finances work so that they can make informed decisions at critical moments in their lives.
Here’s the link to the quiz to test your financial capability.
March’s Home Improver
There are a few sure signs of spring. First is the end of snow (which may or may not be the case after this record-setting year). Next, there are the clocks “springing ahead” to Daylight Saving Time. Finally, there is the emergence of the beautiful crocus plant.
The crocus is a perennial bulb that is a member of the iris family. It blooms in several colors, including purple, white and saffron. In fact, the spice saffron is made from crocus flowers.
Why does the crocus tend to bloom before other plants? One thing we know is that the crocus will bloom at the first reasonably warm day and will remain unharmed even with a few remaining snowstorms left in the season.
The crocus is also resistant to insects, though a hungry squirrel may have its way with it. Its hardy nature makes it a plant you can expect to see growing in your yard for many years to come.
If you plan to plant crocus bulbs, the best time to do it is in the fall. The bulbs settle in for a long winter’s nap before poking up through the soil at the first sign of spring. Some varieties of crocus actually bloom in the fall and should be planted in late summer. Clearly, this plant enjoys a change in seasons.
The crocus looks best when it grows under trees and in large flower beds. Your blooming crocus will display its stunning colors as its delicate leaves sway in the breeze. Following a brutal winter, this amazing flower offers hope for a warm and beautiful spring.
321 Walnut Street #412
Newtonville, MA 02460-1927
Mortgage Broker MB #272780
Deborah Siegel NMLS MLO #13417