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Old 03-06-2011, 02:57 PM   #21
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Are you in a position to make each and every payment from now until the loan is paid off? That's what will happen if your niece's circumstances change even one little bit. If she quits making the payments (e.g. lost her job) you're on the hook.

We have a hard and fast rule against co-signing for anyone for any reason. If someone needs a co-signer, one of two things has happened: they have crappy credit and therefore have proven they are unable to handle their finances or they are buying something they simply cannot afford on their own income.

Run... seriously... run... I realize this is the only thing she's ever asked of you. It was inappropriate of her to put you in such a position. You need to tell her no and not defend your position or then it becomes a "convince me I'm wrong" discussion.

This is such a bad idea, especially in today's high unemployment.
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Old 03-06-2011, 03:04 PM   #22
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Yes, your niece will be able to take the full deduction. A mortgage servicer can only report one SS# to the IRS for 1098 reporting. Assuming your niece will be listed as the primary borrower, all 1098 infomation will be reported on her SS#.
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Old 03-06-2011, 03:22 PM   #23
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Disappointed...it sounds like you have made your mind up where this is concerned and that you have the financial resources to deal with it should the deal go bad at some point in the future. Consider the absolutely worst case scenario...whether it be divorce with the husband throwing the property into foreclosure..(of course before it got there, the banks will come to you first)....or...if "god forbid" something actually happened to your niece. If you can live with the absolutely worst case scenario.. then so be it.
I'm not trying to be morbid here but ...life happens. A friends 10 year old son was just diagnosed with a brain stem brain tumor...and was struck at "what bad cards" some are dealt.

That said...my own daughter recently purchased a condo and before she signed on the dotted line, I flat out told her I would not cosign and I told her why. (If something happened to her, I didn't want that liability, her Dad and I have our own plans...etc.) As it was, she didn't need me to cosign. My own parents would never co-sign for any of their 4 children. There thinking was ...."you want this?...then you take ALL the responsibility for it" and if they won't lend you the money without us...well...then...it is something you shouldn't be doing anyway.".
Good luck to you.
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Old 03-06-2011, 03:33 PM   #24
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Thanks all for the thoughtful advices.

She also wants me to be on the title, kind of portecting her interest just in case, so it may look like I own 50% and her husband and herself own 50%.

She is ready to make an offer on a house today and I will be signing an offer with her.
If you are on the title....won't this go into the calculation of your estate at your death as one of your assets? Any possible problems created with this? Such as ...your will stating things in "percentages"....such that this part of the house gets included in the percentage amount you leave to her (net affect of actually decreasing what you intended for her to have and increasing what the others get)...?
Just thinking out loud here.....
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Old 03-06-2011, 03:39 PM   #25
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If you are on the title....won't this go into the calculation of your estate at your death as one of your assets? Any possible problems created with this? Such as ...your will stating things in "percentages"....such that this part of the house gets included in the percentage amount you leave to her (net affect of actually decreasing what you intended for her to have and increasing what the others get)...?
Just thinking out loud here.....
Excellent point.
I am not an attorney, but I do believe your "audible thinking" is correct. Some of our forum members from the legal profession may chime in on this one.
Would a direct bequest (to the niece) of Disappointed's share in the dual-titled property override any other percentages language in the Will?
I've been an Executrix twice. Funny things happen when the daisies sprout, or as my attorney termed it...people start "picking over the bones". Implied ownership can be tricky. Ownership as evidenced by legal documentation or by purchase document and/or receipt is irrefutable.
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Old 03-06-2011, 03:44 PM   #26
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I've been on the bad end of a co-sign deal, fortunately just a car. Still had to eat $10k. The worst part is the strain this puts on relationships, often destroying them.

Put me firmly in the "this is a bad idea" camp
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Old 03-06-2011, 03:52 PM   #27
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Reading between the lines the house is in the Silicon Valley, probably in one of four communities. The home should retain its value. The husband can probably increase his earnings if he does good work and develops relationships in the community. Paying for this house will be a stretch for them for several years, they will be house poor.

One of my concerns is how the interest, control, of the property is sorted out in case of divorce. Be sure to document your contributions, and have an attorney prepare a document signed by the both of them that should they go into arrears on the mortgage you are authorized to buy/sell the property. I wouldn't do that through a POA as that could be revoked. This is as much to protect her as you. You really need a lawyer to prepare that.

I understand why her parents don't want her to sell the other house as there may be a property tax limitation associated if it is kept in the family.
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Old 03-06-2011, 04:03 PM   #28
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An article from Kiplinger.....



The pitfalls? Cosigners are on the hook for the payment if the mortgage holder doesn't make it. Plus, as a cosigner, your borrowing power is reduced because the mortgage obligation is on your credit report. If you choose to cosign, have an understanding -- in writing -- about when the borrower will refinance and remove you from the loan.

Meanwhile, monitor the payment history to make sure that the mortgage holder is building good credit (so he or she will be able to refinance) and that you're not at risk. Insist on a reserve account, with two to three months' worth of payments, that requires both signatures for a withdrawal.
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Old 03-06-2011, 04:34 PM   #29
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It sounds like it is a struggle just to get into the house. What about on going maintenance, taxes and insurance and start up costs like decorating for a house with that price tag?
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Old 03-06-2011, 04:42 PM   #30
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If you co-sign, you're putting your spouse at risk (don't think this debt only impacts you) as well as financial security for both of you. You must have had an 'uh oh' feeling or you would have already done this. Gut checks are a good thing.

I understand what bb said about having an understanding in writing. What if she loses her job? What if she suddenly becomes ill and can't make payments? What if she accepts a transfer with her job to another state? What if she divorces / marries? You can have all the written understandings you want; however, if she's unable to refinance you'll still be on the hook. Oh sure, you can take the written agreement to court to compel her to refinance to remove your name - that may not be actionable if she's not in a financial situation to do that.

This is just not a good idea.
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Old 03-06-2011, 04:42 PM   #31
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Excellent point.
Funny things happen when the daisies sprout, or as my attorney termed it...people start "picking over the bones". Implied ownership can be tricky. Ownership as evidenced by legal documentation or by purchase document and/or receipt is irrefutable.
Exactly right freebird. Transactions such as this may have unintended consequences either way. Disappointed...it may be prudent to take a look at your will ....if you are on the title of this house. It might create an unintended imbalance for your beneficiaries.
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Old 03-06-2011, 07:17 PM   #32
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Buy the house, rent it to them. This would be a real estate investment for you. They can consider buying it from you in a few years.
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Old 03-06-2011, 08:08 PM   #33
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When I first read the thread, I thought people are over reacting.Understandably banks are being very cautious are requiring co signatures and large downs. I can understand co-signing the loan if it is reasonably small amount of money and they can easily afford it.

However, after you posted the figured I'll join chorus of you are crazy. With 30% down the mortgage alone is $4,400 at that is only for people very good credit. You add in at least $1,000 /month for property tax and insurance and your niece and husband are forking out $65,000 a year for housing. That doesn't include any expenses associated with the other house or maintenance on this house.

On 105K salary I don't see how they have money to eat, much less make other payments (like repaying your down) and god forbid she loses her job. Contracting is notoriously cyclical business, I just don't see a lot of money being spent on remodels. California is desperately short of money, couples like your niece are prime targets for higher taxes.

The situation changes considerably if they sell the other house.

IMO you'd be doing your niece a huge favor, if you channelled Susie Orman, and told her. "Denied you can't afford it"

If on the other hand, you financial situation is such that you can step up and pay the mortgage even if it is underwater, or don't care about your credit rating , in short if losing a few hundred thousand ain't a big deal, than go for it.
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Old 03-06-2011, 08:51 PM   #34
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Thanks everyone.

One of the reasons why I am willing to help is because financially I stand ready and able to buy the house in case they can't make it. I will then resell the house, any losses will come out of her end of the estate. But befoe I will have to step in,they have also verbally promised to sell the other house if they can't make it and try to pay off the mortgage on this new house by themselves. I am not counting on this promise, people do not always follow through on their promises especially when there are more than one person involved. I am more concerned of a divorce situation as things can get messy fairly quickly from what I have seen.

I will be talking to an attorney on partially holding the title on this property and its effect on the whole trust issue.

I did think about just buy the damn house and rent it to them but somehow I do not feel like doing so.

Worst case scenerio is I may be out a good chunck of money, again this will not have any impact on my retirement plan, my niece would be wasting a good chunck of money. I am hoping for the best and preparing for the worst.

mP
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Old 03-06-2011, 09:12 PM   #35
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Thanks everyone.

One of the reasons why I am willing to help is because financially I stand ready and able to buy the house in case they can't make it. I will then resell the house, any losses will come out of her end of the estate. But befoe I will have to step in,they have also verbally promised to sell the other house if they can't make it and try to pay off the mortgage on this new house by themselves. I am not counting on this promise, people do not always follow through on their promises especially when there are more than one person involved. I am more concerned of a divorce situation as things can get messy fairly quickly from what I have seen.

I will be talking to an attorney on partially holding the title on this property and its effect on the whole trust issue.

I did think about just buy the damn house and rent it to them but somehow I do not feel like doing so.

Worst case scenerio is I may be out a good chunck of money, again this will not have any impact on my retirement plan, my niece would be wasting a good chunck of money. I am hoping for the best and preparing for the worst.

mP
This is twilight zone. They own a house; let them rent it out and get a two bedroom apartment in the city with good schools. Kids in apartments go to the same schools as kids in $1.x million dollar houses. Likely a nice apartment will cost them no more than $2000/mo, anywhere but NYC.

Ha
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Old 03-06-2011, 09:13 PM   #36
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Disappointed,

I'm afraid that I have to join the chorus here. It is great that your niece has you and her parents to help her and her husband out, but a $1.1 million home is beyond what a couple with $150-$200k of income can afford (which is obviously why the bank insists on a co-signer).

I have a bit of a different perspective from many of the other posters though. I am less concerned with the effect on you since from what you have indicated it seems that you could afford if things go wrong. I am more concerned about the effect on your niece, her husband (as a couple) and their son.

While I know your motives are good, I think you and your niece's parents may be doing her and her husband a great disservice by enableing them to a lifestyle that is beyond their means. I presume that you and her parents are in a position to provie such generous help by living within your means and saving and investing.

Will their means "fit" with their neighbors who presumably have higher incomes? While they will have a great house, will they be able to afford the cars, vacations, summer camps, and other aspects of life that their neighbors have or will they be the odd couple out? If things turn bad what will this do to their marriage and her self-esteem?

My advice is that you help your niece in a different way. Why did the husband's parents ask them not to sell the $600-$650k house? If they buy the $1.1m house, what would they do with the $600-650k house?

If you decide to proceed, i'd rather see you buy the $600-$650k house from them and rent it or sell it than co-sign on a $700k+ loan.
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Old 03-06-2011, 09:44 PM   #37
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This is twilight zone.

Ha
I was ready for a bunch of multi-quotes and "+1"'s, but that sums it all up.

Stop, take a breath and think about this.

-ERD50
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Old 03-06-2011, 09:49 PM   #38
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You could always help them pay for private school if schooling is the biggest issue.
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Old 03-06-2011, 10:13 PM   #39
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They're going to be paying a lot in property taxes for a $1 million plus house AND a $600K house, aren't they? How much of their income will that take?

But I wish you were my uncle .
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Old 03-07-2011, 06:24 AM   #40
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Recently the parents of the husband gifted them a house worth around $600,000-$650,000.
I would not be surprise if her in-laws are absolutely pissed upset about giving them an expensive a perfectly good house that they don't think is good enough. Your niece needs a serious reality check.
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