Should we co-sign our son’s mortgage?


Dear David,

We are just about to retire, and dream of traveling the world. We plan on selling our current house to finance this dream, and intend on living with our son and his family when we’re home (we have three grown children). Our son and his wife want to buy a larger house with an inlaw setup or secondary unit to accommodate us, and may need us on the mortgage to qualify for financing. Should we buy part of their new house, or just co-sign the loan? – FUTURE GLOBETROTTER

DEAR FUTURE: Between traveling the world and hanging out with your grandkids, it sounds like you’ll be living the dream when you retire. It’s great that you are starting to plan now, since there are several things to consider when coordinating the purchase and sale of three different properties (your current house, your son’s current house, and the home you’ll live in together). 

My first piece of advice in any real estate situation is to figure out where you’re going, and this is doubly true when there are two families to consider. You and your spouse are used to your own space and will undoubtedly want to feel at home while you’re in the new house; your son and his wife will be equally concerned with things like school zones and commuting times.

Seek professional advice to get the ball rolling. In this case, you need to call your Realtor first, and then your mortgage specialist. Your son and his wife will be upgrading to a house with either an inlaw suite or a secondary unit, and the budgetary considerations may be different for each. I suggest they find a home with a legal secondary unit rather than an inlaw setup if possible. From the bank’s point of view, an inlaw setup is restricted to that use only, and won’t typically be considered a formal source of income, even if you pay rent while living there. On the other hand, the bank may consider a legal secondary unit to be an additional source of income for your son and his wife, which may allow them to qualify for their next mortgage on their own. 

If your son can qualify for a mortgage without your help, it will simplify your own estate planning. At some point in time, when you and your wife graduate to glory, I’d prefer your estate not be wrapped up in your son’s house, since this may create complications for your other two grown children. Depending on how the financing looks when your son and his wife are ready to buy, I recommend seeking legal advice before making a capital contribution to the purchase.

PRO TIP: This is a three-property transaction with mortgage and possible estate implications, and the logistics are complicated. Seek professional help. An experienced Realtor can help you find a home that everyone will be excited about, and coordinate your closing and moving dates to minimize the impact of carrying multiple properties at the same time. Meanwhile, your mortgage specialist and lawyer will help your plans come together in a way that makes long-term sense for your family. #Advice #AskDavid #TheNegotiator

David is a top-selling Broker in Kitchener-Waterloo Region. He works personally with you when selling or buying your home. Call or text today for your free home evaluation! 519-577-1212.