Real Estate Corner...

•Q.    Our daughter and her husband want to buy a home, but recently asked us to "Co-Sign" on the loan.  What are the consequences of this action?

•A.     There's nothing wrong with helping a family member or close friend with buying a home.  However, co-signing on a loan should be done with great care and knowledge of the consequences.  Co-signing means that you are extending your personal credit for the benefit of someone else.  Problem is, if the borrower defaults, the lender will look to you for full repayment.  So you're not really a co-signer, you're a co-debtor.  Here are a few tips that may prove helpful when co-signing:

•w     Although you're co-signing, make sure your co-borrower is putting cash into the transaction.  The more they put in, the lower your risk.

•w     Obtain a credit report on the person you're co-signing for, even if it's another family member.  If they've defaulted on other debts, there's a good chance they'll default on the debt you're co-signing.

•w     Ask the lender to release you from the loan when the principal balance is reduced to a certain amount. 

•w     Examine how your credit rating and ability to borrow will be impacted.  Co-signing on a loan can sometimes impact your ability to get financing if you need it. 

•w     Make sure you're name is listed on the deed as a co-owner.  If you're on the deed, and if you make any cash contributions, you may be able to deduct mortgage insurance, property taxes, and a pro-rata portion of interest you pay.  Ask your accountant or tax planner. 

•w     If the home is sold, will you share in any appreciation or gain in value?

If you're considering buying or selling real estate soon, and you need competent and caring representation, please call me at 410-0724.