Advice/thoughts needed when helping with major financial request

[SKL]

4 hours ago, bolt. said:

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.

I think OP is concerned that if the couple buys this house, it won’t meet their needs over the next five years and they will want to move again, thus making it a financially unwise decision.  She isn’t commenting on matters of taste but practical matters that affect finances.

 I think you may be misreading the OP.

[El...]

I have no input on the house itself, because I've had some tiny houses that grew beautifully in value. A house, to me, is not a forever investment, especially as a young couple. 

However, I would never, never cosign, and would refuse to sign the papers if my husband wanted to do it. It's just so very risky.

There are so many things that can happen, and financial risks need to be taken with eyes open and negotiated for the worst cases. Divorce, disability, death,  four babies in four years (that one is fun, but whew!)... any huge stressor and you could be paying off an entire mortgage or somehow talking them into selling it under pressure, no matter what's going on in the economy when it all goes in the pooper!

No. Sorry. Interest is how we pay a bank to carry that risk. Mom and Dad should not carry that.

[Spryte]

I would not co-sign. under the right circumstances, I would give funds, though. This doesn’t seem to meet the criteria, though.

It may not be the best time to buy right now, anyway. There was a fairly recent study — maybe March or April — showing that right now in most of the US it’s cheaper to rent than it is to buy a house over the long term (5 years, IIRC). I am unable to provide links after an unfortunate update on my phone (grrrrrr) but if you google something like cheaper to rent than buy a house, you should come up with articles from the past few months, plus calculators. The one I saw had a calculator that worked by zip code, and I think it was 133% less over 5 years to rent in my area. I probably saw it through Apple News or one of the national newspapers, but Bankrate, realtor.com, ABC news, and more all came up with the story when I just googled. OP, maybe that is something you could share.

I think if I wanted to do something towards helping move them along their life path right now, just because, I’d offer to pay off a chunk of student loans. Or just wait until the time is right for them to buy.
 

 

[Arcadia]

@Spryte this one doesn’t go by zip code but filling it up gives good discussion points.

https://www.calvet.ca.gov/HomeLoans/Pages/Calculator-Mortgage-Rent-vs-Buy.aspx

[Corraleno]

1 hour ago, Spryte said:

It may not be the best time to buy right now, anyway. There was a fairly recent study — maybe March or April — showing that right now in most of the US it’s cheaper to rent than it is to buy a house over the long term (5 years, IIRC). I am unable to provide links after an unfortunate update on my phone (grrrrrr) but if you google something like cheaper to rent than buy a house, you should come up with articles from the past few months, plus calculators. The one I saw had a calculator that worked by zip code, and I think it was 133% less over 5 years to rent in my area. I probably saw it through Apple News or one of the national newspapers, but Bankrate, realtor.com, ABC news, and more all came up with the story when I just googled. OP, maybe that is something you could share.

I read a lot of FIRE blogs/forums/subreddits, and a very common question is whether this is a good time to buy a house. The current answer is nearly always no, it's really not a good time to buy; unless your rent is crazy high it makes more financial sense right now to save and invest the extra money that would otherwise be going into a house.

Too many people just compare their rent to a mortgage payment and think "for a couple hundred extra per month we could own a house and build equity," without accounting for the costs of maintenance and repairs. Or people buy a fixer-upper thinking they'll do the work themselves only to discover that they don't actually have the time, energy, or skills needed, and the cost of hiring professionals is astronomically higher than they think.

 

[Frances]

2 hours ago, Spryte said:

I would not co-sign. under the right circumstances, I would give funds, though. This doesn’t seem to meet the criteria, though.

It may not be the best time to buy right now, anyway. There was a fairly recent study — maybe March or April — showing that right now in most of the US it’s cheaper to rent than it is to buy a house over the long term (5 years, IIRC). I am unable to provide links after an unfortunate update on my phone (grrrrrr) but if you google something like cheaper to rent than buy a house, you should come up with articles from the past few months, plus calculators. The one I saw had a calculator that worked by zip code, and I think it was 133% less over 5 years to rent in my area. I probably saw it through Apple News or one of the national newspapers, but Bankrate, realtor.com, ABC news, and more all came up with the story when I just googled. OP, maybe that is something you could share.

I think if I wanted to do something towards helping move them along their life path right now, just because, I’d offer to pay off a chunk of student loans. Or just wait until the time is right for them to buy.
 

 

Nm

Edited May 24 by Frances