Advice/thoughts needed when helping with major financial request

[*****]

Thanks for all who replied, I need to read through the many responses. As stated no, we will not co-sign but other ideas have been very helpful. 

Edited May 23 by *****
Planned to delete as stated.

[SKL]

I think saying "no" is wise under these circumstances.  I don't think I'd like to be a co-signer on a large loan.  In general, I'd rather give money than lend or co-sign.  It's just less stressful all around ... assuming you have money to give.

Before deciding how to help, I'd want to know the specific reasons why they need a co-signer, and then look at how these matters can be addressed.

If I read you correctly, you seem to be saying their lifestyle is a bit expensive for people looking to buy a new house.  In those circumstances, that should be the first thing they address.  This would allow them to pay down other loans and save a bit more for their down payment, which could mean that they could buy without a co-signer after some time.

Have you encouraged them to analyze the cost of buying a house short-term vs. renting for that period?  I think the old rule of thumb was that if you're likely to move again in less than 7 years, it's not cheaper to buy.  Of course that may have changed some.  The other consideration is that we really don't know whether the house value will hold up.  If the value goes down, it may become very difficult for them to afford to move.  We need to make sure our young adults understand these considerations and try to buy only where they're likely to stay a long time.

 

[PeterPan]

You already know the answer (that you think they ought to continue renting), so why are you overthinking this? 

Sometimes people just need time/space to live their lives and work out things. 

I would not co-sign, as you say, and I would not give them the money. They are not doing without and they have jobs, dreams. They just want more than they can afford yet, which is the story of life. I don't know how old you are, but I would be thinking long term about retirement, long term care (which is $$$$$$$), etc. 

Let them live their lives and work it out patiently their own way. 

Edited May 23 by PeterPan

[Arcadia]

My personal opinion is I won’t go for a small home just to get a bigger yard. Indoor space is more useful when starting a family. Also, we bought our marital homes new because of worries about repair costs with older homes. That allowed us to pay off our mortgages before worrying about major repair costs. The developer of our current home was sued and they replaced the subpar items. I also think that mortgage rates has peaked in the near future so no harm waiting.  Our car loan was less than $300 monthly, home loan was around $2.7k monthly and no student loans. 

[Pawz4me]

More money might not help. If they don't have adequate established credit history then the lender may require a co-signer. I know someone who bought a home in the last couple of years. He had enough liquid assets that he could have bought it outright, but for various reasons wanted a mortgage. Even though he had enough savings/investments that he could have paid for it, the lender required a co-signer for a mortgage because he lacked much of a credit history.

But also -- I know a young(ish) couple with two young kids who are happily living in a very small, older home. They could (I think) easily afford something much larger and/or newer, but that's not what they want. They have done a lot of DIY improvements.

[Frances]

I think you are smart not to cosign. But if you choose to help with the with the purchase of a first home by gifting money for a down payment, I would give it with no strings attached. Unless they directly ask for your advice on which home to buy, I would not give advice or make the gift conditional on you approving of the home and the timing. If they can’t qualify for the loan, even after your gift, then they will have to wait to purchase.

Edited May 23 by Frances

[teachermom2834]

I think if you give the money you have to give it as a gift no strings attached and let them buy whatever house they want with it. Well, not that YOU have to do that, but that is what I would do. I might gently mention some of the issues you have in a just bantering ideas around kind of way but I wouldn’t say I would only gift the money if they bought a house I thought was a good investment. You totally do not have to gift them any money but if you do I would make it that, a gift, no conditions. Not because I think you are wrong, just in the interest of relationship. If you can’t just gift it, don’t give it. 
 

With my luck I would gift the money and talk them into another house which would end up being a disaster and it would forever be all my fault. 
 

Give the money or don’t but don’t put conditions on what house they buy with it even if you totally know they are making a mistake. 
 

Just my .02

[BusyMom5]

From what you have posted, they are not ready to buy a house.  I think the repairs snd upkeep are often overlooked when comparing mortgage vs rent.   It's a lot more than just the cost of the mortgage!  I would politely decline to co-sign at this point.  

[Miss Tick]

1 minute ago, BusyMom5 said:

It's a lot more than just the cost of the mortgage! 

I agree. Our comparison spreadsheet included the cost of lawn mower, ladder, landscaping, furniture....

New marriage, new house, trying to start a family are all big life changes. That is a lot to take on at once.

All that said, for the sake of family dynamics you probably can't point out any of that, and although I can't imagine you would be forced to co-sign, gifting them money might be the only peaceful was out. Family relationships can be complicated and irrational.

[73349]

I would do a gift rather than co-signing, and I would encourage them to have back-up plans for potential further expenses in the next few years (e.g., car issues or a layoff).

What worked for DH and me was to move to a less convenient location for a few years so we could afford to pay off our student loans faster and save for our down payment. If that makes sense for their real estate market and situation, I would suggest it. Then you can make your gift now and they can earn interest on it and/or avoid interest on their student loans to be better positioned to buy a house.

They sound like good candidates for YNAB to me--I definitely wish I'd had it at that stage.

[SKL]

Yeah TBH I thought I was going to save money when we bought a house, but I didn't (in the short run).  It was still a good purchase since it meant a lot more room + equity, but it made my already tight budget tighter, which I had not expected.  And I was an MBA & CPA at the time, if that tells you anything.  😛  Surprises!  Gotta love them.

Edited May 23 by SKL

[Katy]

I wouldn’t gift OR cosign, at least not yet. They should be putting maximum money towards retirement. They can always withdraw that without penalty for a down payment. With that, and signing up for a credit building program through a credit union, they’ll qualify for a mortgage in less than three years. 

Buying a house now, when they have no extra money for the things that will inevitably go wrong, let alone the other expenses that inevitably go along with a new house, is a terrible idea. They’re adults. They need to adult and be patient. You can always gift them money when they do buy a house or when the first baby is born. 

[Lecka]

We saved money immediately after buying.  When we bought, at the time it was a better deal than it is now.  
 

The other thing is that our rental had very poor insulation and windows and doors etc, so our utilities went down a lot.  I was actually surprised how much our utilities went down, for heat and for A/C.  
 

But I think that was a pretty local circumstance, we wanted a yard and there were very few single family homes for rent.  There were not good options for us as far as apartments, the complexes there were not targeted towards children living there. 
 

Edit:  my parents helped us in looking at our finances to buy this house, and brought up they thought we should buy a house since we were spending so much on a shoddy rental, and we were having problems with our landlord, too.  My mom knew how much rent we were paying and used that to compare to a mortgage payment, etc.  

Edited May 23 by Lecka

[Clarita]

I would say in general if you don't feel it's a good financial move on their part and/or a good investment for you I wouldn't co-sign. Whether you give them money for this endeavor, that's up to you. With that I think it's best to consider it a full gift and not be tied to the money and how it ends up being used.

Of course you can choose to not help them out at all. Both of our parents chose not to directly help with our home buying process (it can get messy especially with emotions and money and stuff). My parents offered to buy some appliances and his parents helped out with opening the door for contractors and lent us some money, because some of the money needed transferring time, but we needed to write the check.  In hindsight I'm glad we did it this way because we are all adults and we don't always see eye to eye on financial things (even though we have a good relationship with our parents). For the most part no one is really "wrong" but it gets hard when someone's asset is in something they want a say in what happens, which can be complicated when it's someone's home. 

[*****]

This is ALL great feedback and gives me more to think about.  Thinking of retirement at their age? No, I had not even thought about that.  

I do tend to overthink a lot of things, I guess I try to see the big picture.  My husband, to me, is not one to say no to others in a sense and I think it's because he would prefer to avoid conflict. To him, if we gift the money, which we would do rather than to co-sign, it will come out of their inheritance, which I understand.  I do prefer they work towards paying off the 'gift' because that would be the responsible thing to do when you ask for money and if they don't fully pay it back, that will come out of their inheritance.  Both of us agree that really, if you can't afford something, you should not purchase. 

YNAB-I never heard of before and will look into it. They have taken budgeting courses and have made a budget. But we have seen how they could tighten their belts more and no, we know we can't say anything about it. 

I've taken bits and pieces of what all of you had said and will think further on that, thank you. 

[annandatje]

I would say no unless you have funds on hand to pay off full mortgage.  Have seen co-signing ruin family and friend relationships.  Anything could happen, and future is unpredictable.

I learned by experience to make gifts instead of loans.  

[annandatje]

PS. To qualify as a gift, you have to give up all rights to assets gifted.  It is not a gift if you expect any sort of repayment.  
 

I would proceed with caution regarding an advance on inheritance unless one has more than enough assets to cover their anticipated retirement needs including unforeseen things such as long term care.

[Clarita]

Personally I would say unless it's impossible for them to ever afford a home in your area without it I would not do a loan... (Plenty of people do it in my area, but it gets messy, your husband is conflict avoidant and a lot of conflicts happen big and small.) There are so many unforeseeable and foreseeable reasons that payback doesn't happen or doesn't happen in a timely manner so many specific hard to foresee reasons that it gets messy. I've seen it get messy and emotional even in best case scenarios. (Even with contracts because most people don't want to follow through on the consequences like a bank would and whether they follow through or not it's contentious.)

In terms of inheritance, unless this is your only child (and perhaps the only person who's receiving your estate); gently they won't remember the specifics of this at that later date. Even if they remember the gist of this happening the details are going to be blurry and it will seem unfair to all the siblings involved no matter how fair it seems to you now or how fair it really is then. Life unfolds inheritances shrink and increases, dividing lines shift, these loans get lost in that fray.

[Faith-manor]

I would not ever co-sign. This can mess up your credit a lot, and tie you to something that may or may not be properly maintained. It can negatively affect you in retirement.

If they are tight and if they have debt, I would be more inclined to actually pay a debt for them so they are less tight and can build savings and credit rating faster. We did this for our dd. She owed $7500 on a medical bill, and was being absolutely gouged by the hospital with interest. We paid that off which removed a $500 payment from their monthly budget, and brought relief.

In this volatile market and knowing there be a big bubble burst coming again, I would encourage them to take full advantage first of 401K matching if their employers offer it. That is just free money right there, and this younger generation is going to pay in a ton of social security, likely end up with the retirement age raised to 70, and still never see a dime of social security because the old geezers on the Hill are just fine with fleecing Gen Z to the max while complaining they can't afford to buy new cars, go on vacations, and "participate in the economy" the way that billionaires would prefer.

Emergency and retirement savings should come first. Then they need money above and beyond the down payment so they can pay for all of the inevitable things that go belly up the minute a house is sold like the refrigerator or the range or the furnace. It is just amazing how appliances seem to be like the the dog in The Odyssey and once they see their master one last time, roll over and die.

[gardenmom5]

have they gone to a bank/mortgage company?  What did they say?

Are they prepared to have you sticking your nose in their finances - like a bank/mortgage company would - and saying 'We feel you shouldn't be having these extra car loans and you need to do better controlling spending'?

Could they afford a condo/townhouse on their own?

It isn't something I would feel comfortable doing.

[Annie G]

Like others have mentioned- interest rates have likely peaked and there might be some deals coming if (when?) the housing market hits a bump in the road. So right now, retirement savings, paying down debt, putting money aside for the down payment, closing costs, and moving expenses makes sense. 
If the reason they need a co-signer is due to their credit score, check whether the area they’re looking at qualifies for a USDA loan. The couple who bought our last house used that and their credit score was only 620.  It’s an excellent program and available in a lot of areas. 

[QueenCat]

I'd be inclined to pay off the student loans. I wouldn't be inclined to pay off other debt, especially if they're likely to build it back up again. 

A gift should never be perceived as something they'll pay back, like a loan. In fact, in their mortgage application, they will be required to state where the cash is coming from. They will have to state that they will not be paying back any gifts. 

[bolt.]

I find it a bit "off" that you seem to be using this request for cosigning as an opportunity to join in the process of wise decision making about housing. You seem to be positioning yourself as a guide to making the best possible financial and housing decision, with the implication that your cosigning would be contingent on them making the choice you see as most likely to have the best outcome.

That's all really much closer to the decision than you need to be. It's a form of meddling through incentivization.

Here's the thing about cosigning. If they need a cosigner, they need one, and it's because they don't qualify for a loan. If you are not considering cosigning at all, then your role in this decision is over. Without a cosigner, they can not have this house, nor is it likely that they could get any house at all. A gift of money is unlikely to help. (Unless you are considering a gift of more than 25% of the value of a property, which might change their qualification status.)

If, in your opinion, a mortgage at this time would be too much for them, and you are unwilling to take that risk of default onto your own financial shoulders -- that's really just fine. if that's the case, that's the case. In fact, the bank has done the math, and they agree with that assessment. The decision you are being asked to make is whether you will stand behind them in case they default.

However, you are *not* being asked to decide whether the house is the right size for them, with the right yard, the right, commute, the right wiring, or anything else. Unless they ask you what you think of those factors, those are not your factors. *Their* priorities and perspectives are the correct things to have in the drivers' seat when *they* are selecting a home to purchase. Your wisdom may be asked (and you can answer questions) but it should never feel to you like you are more likely to make the right call about this key feature of the life they are building together.

If you think their ability to carry the debt is just fine, and are, theoretically, willing to say so to a bank -- but you just choose not to do that -- as a method for steering them away from the path they think is best (and onto the path you think is best). Well, to me, that would be a crummy thing to do.

While it's true that nothing requires you to help people do things that you don't think are wise to do... it's just a little "off" to withhold help that costs you nothing and you think of as no risk at all, openly acknowledging that you are doing it simply because you don't think the timing and size of this house is ideal in your eyes.

On the other hand, your money is your own. I suggest that if what you want is to give them a cash gift towards housing, with strings attached, then tell them so, write it down, and let them take or leave the deal. Otherwise I suggest it might be a good time to back away from the details of other people's business.

[SKL]

10 minutes ago, bolt. said:

While it's true that nothing requires you to help people do things that you don't think are wise to do... it's just a little "off" to withhold help that costs you nothing and you think of as no risk at all, openly acknowledging that you are doing it simply because you don't think the timing and size of this house is ideal in your eyes.

I don't think OP thinks of it as "no risk at all."  The risk is that the cost of moving will end up being more than expected, to the extent that it may be difficult to make payments without additional help.  That the parents will have to either pony up or take a credit hit.  That's not an insignificant risk.

I'm pretty sure this is the main reason why most responders are saying "don't do it."

That said, what's wrong with expressing to the Boardies that this doesn't look like a good idea for the young couple?  It doesn't sound like OP is planning to tell them what to do or bribe them.  However, as a mom, I don't think it's wrong to point out important issues that the young couple may not have thought of.  We'd also do the same for close people who aren't our children.

Edited May 23 by SKL

[bolt.]

9 minutes ago, SKL said:

I don't think OP thinks of it as "no risk at all."  The risk is that the cost of moving will end up being more than expected, to the extent that it may be difficult to make payments without additional help.  That the parents will have to either pony up or take a credit hit.  That's not an insignificant risk.

I'm pretty sure this is the main reason why most responders are saying "don't do it."

That said, what's wrong with expressing to the Boardies that this doesn't look like a good idea for the young couple?  It doesn't sound like OP is planning to say tell them what to do or bribe them.  However, as a mom, I don't think it's wrong to point out important issues that the young couple may not have thought of.  We'd also do the same for close people who aren't our children.

That's fair: which is why I started with "if" -- because none of the OP's comments seemed focused on doubts around the couple's ability to make the payments. In fact, earlier I mentioned that "if" they thought it was a bad credit risk, they should refuse outright... for reasons of it being a bad credit risk.

I don't think cosigning is an insignificant risk. Cosigning is often a huge risk. That's why I'm trying to focus the OP on asking herself how she assesses the credit risk (instead of asking herself if she likes the house).

I think it's the cross-over reasoning that I'm responding negatively to.

Refusing to take a credit risk because it's risky and you don't want to do it -- that's perfectly normal.

But *if* you were to believe the credit risk is negligible, *but* you were to refuse anyways, just because you don't care for the house in question or approve of the exact timing -- that feels off.

Edited to add: People are notoriosly bad at assessing credit risk, and banks are actually spectacular at it -- so the fact that the couple has been asked to seek a cosigner is actually quite a big red flag. It's just that the OP might need to work her way towards that conclusion.

Edited May 23 by bolt.

[PeterPan]

What you could do is buy the house yourself and *rent* it to them if you have the stomach to handle the potential problems that come with that. 

Personally, I'd stay out of it. As @bolt. was explaining, it's pretty hard to do this without strings attached. This is just the start of their adulting and they need to suck up and do it. 

[Pam in CT]

3 hours ago, Frances said:

I think you are smart not to cosign. But if you choose to help with the with the purchase of a first home by gifting money for a down payment, I would give it with no strings attached. Unless they directly ask for your advice on which home to buy, I would not give advice or make the gift conditional on you approving of the home and the timing. If they can’t qualify for the loan, even after your gift, then they will have to wait to purchase.

This.

 

The only other approach I might **consider** depending on relationships is to pay off -- directly -- a hunk of my own adult child's student loans (which would have the effect of easing their credit status and giving them more room to maneuver within their current monthly income).

 

 

[pinball]

3 hours ago, ***** said:

co-sign

You shouldn’t do it bc your post is filled with negativity and judgment about how they handle their finances. And these judgments seem to be in place whether they ask for financial help or not. Adding toxicity like this to what is a stressful time but also can be exciting and positive is a yucky way to be.

I hope they have someone else to turn to that will be supportive, as a co-signer or not.

[Lecka]

I do have an opinion about the “early inheritance” idea….

This could depend on everyone’s ages and various things, but I think they sound way too young and also currently in a good financial situation, to be giving them their inheritance early.

Would you have already given them there share, if 10 years from now there is some kind of emergency situation and they have kids?  At that time, would you say “sorry we gave the early inheritance 10 years ago, yeah, we thought it was short-sighted at the time, too bad for you.”  
 

I think it should be reserved for emergencies, basically, or some kind of crisis.

 

Unless, the parents are at the age they are thinking it’s how they want to distribute their assets, and already know all about their expected end-of-life situation, at a later stage in life.  
 

If it’s going to be giving them money but saying “it’s an early inheritance,” but everyone knows that is just being said and isn’t going to be treated literally, I think that is different.  
 

But I do think it would be better to be available for an emergency or crisis later, if it would be “one or the other.”  
 

Also this is how I would look at it, in case the in-law is looking at it this way: I would look at the co-signing as a “yes or no.”  I wouldn’t expect “no, but we are obligated to give money now, or maybe even take out a loan from the in-laws.”  I would not see it that way, I think I would see it as “okay, it’s a no,” and not think there was an implication that we would expect cash instead.  It’s hard to know what they are thinking on their side.  

[PeterPan]

25 minutes ago, bolt. said:

Cosigning is often a huge risk

Biggest risk is the family relationships. The financial stuff is real, but $ within family members is so, so ugly. It's not worth it. 

Does op have a licensed financial advisor? That would be another source to ask for advice. Many investment brokers are *not* licensed and do *not* have a fiduciary responsibility or actual financial management training. So ask your licensed financial advisor what sensible ways are to handle this. Ask them if you are adequately positioned and should be giving away large chunks of your estate early. Some people should to avoid estate taxes, but those people also tend to have trusts and someone helping them. So ask that person if you want objective outside advice from someone with a fiduciary responsibility to tell you straight what is in your best interest.

Edited May 23 by PeterPan

[PeterPan]

5 minutes ago, Pam in CT said:

pay off -- directly -- a hunk of my own adult child's student loans

Aren't these very low interest?? I don't see trading low interest debt for higher interest debt on something that can shift in value and brings all kinds of expenses.

[Lecka]

As far as for myself, I know my husband and I would have different opinions.  
 

As far as compromising with my husband, I think I would be concerned number one with our own financial situation and what we could really afford in the long-term, and some of our values in the long-term.  We do have a value that we would want to help our kids if they were in trouble, at any age.  We also want to consider all our kids.  We would be thinking about what it would mean for our other kids and situation we might get into in the future with the other kids.  
 

Number two, I would be concerned about if we were taking away a chance for them to be independent, or if we were going to help them to go in a direction of not being financially responsible.  
 

My own husband has a major value of keeping things equal between kids, so if we did this but thought a request for cash from a later kid was honestly a bad idea, he would feel really bad about that.  He might even say we had to give a later child cash too, even if we knew it was a bad idea, just because he thinks it’s so important to keep things pretty equal between kids.  Yes we do want to give kids what they “need” without keeping track of tit for tat, but this seems like it’s far from a “need” situation.  We would not see this as a “need.”

 

But with that said, I know I’m more of a no, and my husband is more of a yes.  We might end up needing to compromise on some kind of yes, on our side, because I know my husband would want to.  

[Arcadia]

46 minutes ago, bolt. said:

People are notoriosly bad at assessing credit risk, and banks are actually spectacular at it -- so the fact that the couple has been asked to seek a cosigner is actually quite a big red flag. It's just that the OP might need to work her way towards that conclusion.

OP like many people probably already know that but how to convey that diplomatically to children/siblings is the hard part. Many of us had probably been approached to borrow money from and we try not to say outright that they are bad debtors. They probably rather have a third party (e.g. the bank) tell them that. 

[Pawz4me]

52 minutes ago, bolt. said:

 

Edited to add: People are notoriosly bad at assessing credit risk, and banks are actually spectacular at it -- so the fact that the couple has been asked to seek a cosigner is actually quite a big red flag. It's just that the OP might need to work her way towards that conclusion.

I don't think this is necessarily true. So much nowadays here in the US depends on credit score and credit history. The young couple I posted about earlier have more than a million dollars in liquid assets but couldn't qualify for a $450k mortgage w/o a co-signer because they have little to no credit history. They'd paid for everything in cash up until they wanted a mortgage. They wouldn't have been a true risk at all, probably.

[Arcadia]

Gift for house: my in-laws gave each kid the same amount and they told my husband they are giving him this amount because that was what they gave his older siblings. No adjustment for inflation which didn’t bother us. My parents gift us an equivalent amount to buy furniture. 
 

Early inheritance: my dad gave some two years ago after my mom passed. He has his pension and has great medical benefits so he rather gave us some so that we could use it for college tuition and expenses.  We have enough to pay for college but it is a nice buffer to have.

[bolt.]

12 minutes ago, Arcadia said:

OP like many people probably already know that but how to convey that diplomatically to children/siblings is the hard part. Many of us had probably been approached to borrow money from and we try not to say outright that they are bad debtors. They probably rather have a third party (e.g. the bank) tell them that. 

Thanks! That has really helped me see the OP's motives for redirection of the conversation (away from credit risk, and towards the housing decision itself) more clearly and more charitably.

While I was seeing this as coming from a desire to meddle too close to other people's life choices -- I wasn't seeing it as a way of tactfully distracting them instead of having to openly insult them. You're right that it can be really insulting to try to find a way even the most tactfully way to say, essentially, "I think you are a bad credit risk, and I don't want to be left with the consequences of your debts." It's much warmer to say, "I don't think it's a good time to buy or a good house to choose." -- it's a bit on the side of over-involvement in other people's business, but it definitely makes the whole thing the house's fault, and not any of the people's fault.

There may be wisdom there.

On the other hand, there might be tactful options for telling the truth about the personal risks of becoming a cosigner. One is maybe that you have a moral objection to taking on a debt that is not your own. Another is maybe something like, "I really wish the bank considered you qualified to borrow this independently, but since they have run the numbers, I don't feel comfortable taking on a risk that the bank won't take on as a business risk."

It may be that the couple is only mildly hopeful for a cosigner, and is feeling like there's no harm in asking. Maybe they will take a 'no' really easily. I still don't think it's wise to serve up the 'no' with a side of unsupportive second-guessing about the virtues of the house or timing.

Edited May 23 by bolt.

[Arcadia]

4 minutes ago, Pawz4me said:

The young couple I posted about earlier have more than a million dollars in liquid assets but couldn't qualify for a $450k mortgage w/o a co-signer because they have little to no credit history. They'd paid for everything in cash up until they wanted a mortgage. They wouldn't have been a true risk at all, probably.

When we asked about mortgages, the banks actually look into savings and stocks on hand and would be skeptical of lending us more than we need. Some banks are more stringent with mortgages now. For example, if I have $500k in bank deposits and around $500k of stocks and want to buy a $1.5m townhome, they are reluctant to lend us $1m even if we could pay the monthly mortgage. We already have credit history since we paid off this home and our car. They are actually willing to approve a $1.1m loan for a more expensive townhome. 

[fairfarmhand]

My dh and I have a policy of not co-signing loans. So in my house we’d frame it as “oh…we don’t co-sign. But if you wait a year or so I’m sure you’ll find something even better.” 

[Lecka]

I don’t know if I think it would be unsupportive to share honest concerns.  
 

I think it might not be my business, for sure, but if I was honestly concerned I think I could say so.  
 

This doesn’t seem like it would be a disastrous choice as far as I can see, which makes me think it would probably be fine to leave it up to them.

 

But just in general, I think there is a role for parents to say what they think if they think it does need to be said.  
 

Especially if it’s something they honestly wouldn’t know about because of age or a lack of experience.  
 

I guess people have reason to know if it would be welcome or not, but I think it can be okay.  
 

I think if it could be decoupled, so one decision on money or co-signing, and then a separate conversation about being surprised about the price of renovations.

 

This is kind-of embarrassing, because I didn’t say anything, but I didn’t realize…. In our current home, my husband thought “oh we can update the kitchen.”  I thought — okay, but it will be a while.  Then later my husband turned out to have no idea what price range it would be!  It’s definitely not a make or break situation, but he did not know how much it would cost and he was working with bad numbers in his mental estimate.  
 

Ime, realtors may be able to give estimates this way, and if a parent is going along with the realtor, they could ask.  Or they could say “I don’t know what prices are since you live somewhere else, I wonder if the realtor knows?”  I think that could be low-stakes if there are those concerns.  It might be possible to get utility records too.  
 

To me this is all stuff I didn’t know and I was relying on my parents.  Of course there are other ways to get information too, but I did talk to my parents.  My mom was visiting us once and talked to the realtor with us, other times we would talk on the phone before or after we talked to the realtor.  

[Lecka]

For the OP, maybe you can volunteer to be the one to share the decision.  
 

I think too, it’s hard to know what your husband is thinking, maybe he really is just not wanting to say no.  On the other hand, maybe he does want to allocate some money for them.  
 

If your husband thinks it’s fine to gift money without expecting it to paid back, then you would not be on the same page.  I think in that case, it’s important to get on the same page, or else I think that he might want to forgive the loan, and you might not want to, which would be frustrating.  
 

The other thing I have seen, is that a later child ends up marrying someone the parents think is a scumbag.  Then they are left with either doing the same thing, or not doing it.  Or getting into wanting to give a gift to go only to their adult child but not their spouse.  Or watch there be a divorce and the ex gets part of the value of the gift.  Just because we have seen this fairly close to us, it is something that I think we would want to think about, because we do both think in general, if we did this for one we should do this for another.  But we really might not want to.  I see this as a down side to “just give them cash and they can do what they want with it.”  If that is the standard for an older child, can a younger child be told “well but not for you, we think you married a scumbag” without it causing problems.  I don’t know if this seems like a low-probability chance to other people, it seems to me like it could happen, because I know it has happened to really nice couples who were good parents and had good relationships with their kids.  

[Arcadia]

7 minutes ago, Lecka said:

 I see this as a down side to “just give them cash and they can do what they want with it.”  If that is the standard for an older child, can a younger child be told “well but not for you, we think you married a scumbag” without it causing problems.

If the amount gifted to help with down payment of a home is small, even if divorce happens, just take the 50% loss of amount gifted as good riddance. There are lots more worrisome stuff than $10 to $20k to worry about in a bad marriage or a divorce. 
For my relatives and my husband’s relatives, we have cousins who stayed single while their younger siblings get married. So the financial considerations are different since some singles bought their own homes while some stayed with their parents to help do all the household chores and repairs for their parents. 

[SKL]

Yeah it can be hard to know how to say "no."

It would be nice and neat to just say "we don't co-sign on home loans, sorry.  I'm happy to sit down with you and help you brainstorm how to get to a point where you can get a mortgage without a co-signer."  Or if that's too intrusive, to suggest an independent source of financial planning advice toward that goal.

However, this only works if we're 100% sure we'll always say no to all of our kids to that kind of request.  I'd rather leave open a bit of space in case the facts support a co-signature at some point.

My kids are too young for this, but I could see this being a touchy issue someday.  One kid is likely to both earn AND spend more than my other kid.  Whether the earnings will outpace the spending with either kid is unknown.  But if they come to me with financial requests, it's likely that the decision process for me will be different.  I'm not going to watch my kid starve over some financial principle.  But I'm also not going to knowingly reward bad choices.  Call me a busybody.  It's my money until it isn't.

Not the same thing, but my brother asked me for a significant loan for his kid to go to an expensive college.  I decided not to commit to that, because, among other reasons, I saw no evidence that it was likely to be repaid.  Instead I opted to give a still generous gift of money.  People got mad ... I guess their whole life dream rested on borrowing money from Aunt SKL.  Wish I had simply said "no" up front.

[Frances]

3 hours ago, PeterPan said:

Aren't these very low interest?? I don't see trading low interest debt for higher interest debt on something that can shift in value and brings all kinds of expenses.

Not necessarily. Depending on the type and when they were taken out, some could have interest rates higher than a new mortgage.

[Arcadia]

@***** Now might be a bad time to talk about financial planning but if they are planning to start a family, I would factor in infantcare costs into mortgage planning as I am assuming they are currently double income no kids. Our plan was for me to stop working after DS19 was born and that I might have to go on no pay leave for complicated pregnancies (was on bedrest).  So we bought our first marital home with that in mind, that mortgage payments would be manageable on only my husband's income. In the end whatever little I earned while pregnant went into emergency savings.

[Corraleno]

I would neither co-sign nor gift money to adult children that I felt were making a poor financial decision. This couple has significant debt and seem to be want to buy a house for emotional and/or FOMO reasons without having seriously considered whether it makes sense from a financial perspective. Interest rates are likely to come down soon, and since they currently have affordable rent, it would be more prudent to focus on tightening their own belts as much as possible in order to pay off their other debts before they take on a mortgage — especially for a house that is likely to need a lot of work that they may not be able to afford.

I'm perplexed by the posts scolding the OP for being critical or unsupportive — if I think my child is about to do something dumb, especially something with potentially long-term financial consequences, why would I want to not only enable it, but literally provide the funds for it?? Parents who help a young couple buy a house they can barely afford are likely to find themselves in an even more awkward position in the future, when the new homeowners are asking for another hand out to pay for a new roof or furnace or whatever. 

Parents can be helpful and supportive to adult children without enabling poor financial decisions. 

 

[bolt.]

9 minutes ago, Corraleno said:

I'm perplexed by the posts scolding the OP for being critical or unsupportive — if I think my child is about to do something dumb, especially something with potentially long-term financial consequences, why would I want to not only enable it, but literally provide the funds for it?? Parents who help a young couple buy a house they can barely afford are likely to find themselves in an even more awkward position in the future, when the new homeowners are asking for another hand out to pay for a new roof or furnace or whatever. 

Parents can be helpful and supportive to adult children without enabling poor financial decisions. 

 

If this is one of the ways my posts are coming across, I hope I can apologize and clarify.

My main focus is that if people are being asked to become cosigners, they should focus on whether they are willing or able to become cosigners in terms of the financial position they are willing to put themselves into, and in terms of the impact becoming a cosigner might have on their own lives.

If the parents feel that the kids are taking a financial risk, that interest rates are bad, that their actions are "dumb" financially because the payments could predictably become difficult to meet, if they seem likely to divorce before the loan is repaid, if it seems like the asset is overvalued at its current price -- all of those are all very good reasons to refuse to become cosigners.

There are lots of very good reasons to refuse to become cosigners -- including simply the desire to never cosign for anyone for any reason.

If the OP has good reasons to refuse to cosign, they should definitely refuse to cosign. (As they have stated now, they intend not to.)

To me, though, there are also "bad reasons" to refuse to become cosigners.

Among "bad reasons" to refuse to become cosigners is that the people who won't be living there think the house is too small, too old fashioned, too difficult to live in, or the imminence of optional renovations. It really isn't for people who won't be living in the house to be allowed to 'call' things like: whether the small size is worth a shorter commute, or vice versa.

Other "bad reasons" to refuse to cosign are that you have ideas about the future of their family, or how they spend their money, or what they like to do with excess money that they currently have, or what you think they might or might not do if their budget got tighter (unless you think 'not paying the mortgage' is one of the things they might do).

Considerations like these are not considerations of *your* financial risk. They are considerations of what kind of life the potential home buyers want to enjoy and why. The original post was full of all kinds of info on these topics, which seemed really beside the point of whether or not they wanted to take on a financial risk, and more focused on whether the couple was making an acceptable decision just generally.

To me, these are "bad reasons" to refuse to cosign because they are intrusive into the personal lives of other people, who really should be trusted to understand their own business and know their own tastes and priorities (and be able to ask for and receive advice if they want it). It would be a bit controlling to make 'strings' like these attached to the possibility of cosigning. Having made the decision not to cosign, obviously the OP is not doing this "strings attached" thing, but the way they wrote made it sound like they were muddying the waters around a significant decision with irrelevant and overstepping types of concerns, primarily about the house itself. If the thought was "If it was a better house, if it was a wise decision in our eyes, we might agree to cosign." -- that wasn't a well-boundaried thought to have and it wouldn't have promoted either family harmony or good financial reasoning.

And yet: It's not out of bounds to give a heads-up about potential 'lifestyle' issues. Even if you aren't asked for advice in a situation like this, it is possible to politely volunteer a fun fact or two. The unhealthy bit would be tying the advice up together with the money.

[Arcadia]

16 minutes ago, bolt. said:

Among "bad reasons" to refuse to become cosigners is that the people who won't be living there think the house is too small, too old fashioned, too difficult to live in, or the imminence of optional renovations. It really isn't for people who won't be living in the house to be allowed to 'call' things like: whether the small size is worth a shorter commute, or vice versa.

I interpreted OP's original post as asking for opinions and not what she would tell her kid. As a very risk adverse person, I do like to hear opinions from people who are less risk adverse when making a large financial commitment. In our case it is buying a new car. For example, should we buy this year while price is still high and layoffs are still happening at where my husband works, or put more into emergency savings and wait for car prices to go down.

[Scarlett]

1 hour ago, Corraleno said:

I would neither co-sign nor gift money to adult children that I felt were making a poor financial decision. This couple has significant debt and seem to be want to buy a house for emotional and/or FOMO reasons without having seriously considered whether it makes sense from a financial perspective. Interest rates are likely to come down soon, and since they currently have affordable rent, it would be more prudent to focus on tightening their own belts as much as possible in order to pay off their other debts before they take on a mortgage — especially for a house that is likely to need a lot of work that they may not be able to afford.

I'm perplexed by the posts scolding the OP for being critical or unsupportive — if I think my child is about to do something dumb, especially something with potentially long-term financial consequences, why would I want to not only enable it, but literally provide the funds for it?? Parents who help a young couple buy a house they can barely afford are likely to find themselves in an even more awkward position in the future, when the new homeowners are asking for another hand out to pay for a new roof or furnace or whatever. 

Parents can be helpful and supportive to adult children without enabling poor financial decisions. 

 

Yes. This is where I come down.

[Corraleno]

18 minutes ago, bolt. said:

the way they wrote made it sound like they were muddying the waters around a significant decision with irrelevant and overstepping types of concerns, primarily about the house itself. If the thought was "If it was a better house, if it was a wise decision in our eyes, we might agree to cosign." -- that wasn't a well-boundaried thought to have and it wouldn't have promoted either family harmony or good financial reasoning.

See, I still disagree with this. I don't think it's overstepping boundaries to decline to provide a gift for something I think is a bad idea. If they can buy the house they want with their own money and credit, I might suggest waiting a bit, or looking for a different house with lower maintenance costs, etc.,  but wouldn't actively try to prevent them from buying what they want. But if they want to use my money or my credit to buy something they really can't afford on their own, then IMO I have every right to choose not to enable something that I think is a bad financial decision. 

As an example, DD drives a 2016 Prius, which I paid for and which is registered in my name. At one point she wanted me to sign it over to her so she could trade it in on a new Camry, including taking on a significant car loan.  I told her she's welcome to buy herself a new Camry when she's saved the down payment and is working full time at a job that will easily cover the payments plus all her other expenses, but I did not believe she would be able to handle a significant monthly car payment, on top of the large balance she carries on her credit card, without a much steadier and better paying job than she had at the time, so she was free to continue driving the Prius but I wasn't going to let her trade it in. She was big mad at the time, but I was right — if I'd let her get the Camry, she would have defaulted on the loan when she lost the job she had at the time, and then she would have been even madder at me for "making her lose her car" by not picking up the tab every month when she couldn't make the payment.

A lot of young adults really don't have a good handle on finances, and it's not being "unsupportive" to decline to enable imprudent choices. My kids are free to buy whatever they want with their own money, that they earn, but if they want me to give them money to buy something, then I get some input into that choice. 

[bolt.]

I'm just trying to differentiate declining on the basis of thinking it's a bad *financial* decision -vs- declining on the basis of thinking it's a bad decision in terms of personal taste, priorities, or lifestyle. (I TOTALLY support and AGREE with you that we don't lend our money or credit towards decision that are bad for *financial* reasons.)

If it's a hypothetical house was a fine *financial* decision, but didn't suit the parents' idea of life-wisdom or personal preferences... that would be crummy to me.

Of course, people don't have to give gifts for any reason at any time.

Of course well-off parents can use conditional gifts to incentivize adult kids in all sorts of ways.

Knowing that we can use conditional gifts to incentivize adult kids is something that we need to recognize as a tool parents have been using for years to push kids into places they would rather not be in. It's powerful to dangle a carrot over some options and not over other options. Recognizing that power should invite us into the nuances of when we should and shouldn't apply that kind of pressure.

It matters what *exactly* is making the decision 'imprudent'. Not assisting our kids into obvious financial risks is really normal. But where is that line? When do we assist them if the finances are fine, but we have 'other concerns'? Which other concerns rise to the level of withholding support that we might otherwise be considering? How many things will we incentivize/deincentivize this way? (Do we pick their school? Their major? Their city of residence? Their spouse? Their number of children? -- Hopefully this list makes all of us a little uncomfortable with the power of money to pressure the types of decisions adult kids should be making as adults.)

To me, not wanting to cosign a mortgage because cosigning is a big risk that you don't want to take -- is really normal.

Not wanting to cosign because the house they like has flaws-of-living-there that you recognize but they don't seem to mind -- is slightly over that line for me.

Not wanting to cosign because the house they like has potential *financial* risks that maybe the couple doesn't see -- to me that's right on the line. Which is what makes this an interesting example.

The OP is gone, and the details would matter, but it is interesting that most of the 'problems' with the house struck me as nonfinancial in nature. The main theme didn't seem to be 'they wouldn't be able to make the payments' -- the main theme seemed to be that they might not like living there, and they seem to be in too much of a hurry.

As an adult child of wealthy parents, I have been subject to dozens of "we will pay for xyz, if it fits abc criteria" types of arrangements. (The first of which was, "We will give you $100 to start investing if you read 'The Wealthy Barber'." --  as a teenager.) I feel like I know which ones felt pushy and which ones felt like respectful partnerships.

To me, even this situation could work if the parents just say, "We are willing to give you $xyz towards your down payment on a home, but only after month/year (or 'only after your other debts are below $xyz'), subject to us approving the house you have in mind and being closely involved with the selection process." -- but you get there by first saying "no" to cosigning, with the *financial* reason why not. And second, you do it well by laying out the terms in advance: if you want approval veto, you say so. Then the kids know there's a deal there, and they can take it or leave it, but they aren't being manipulated or obliquely pressured.