Should We Cosign for Our Son's Mortgage?

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Considering the legal and financial liability that comes with guaranteeing someone's home loan.

My husband's son has asked us to cosign for his first home mortgage loan. We have three questions.

  1. What are our rights and responsibilities if we do so?
  2. Will the loan show up on our credit report?
  3. If he should make late payments, will this affect our credit rating?


Rights? Being a cosigner on a home loan (or other loan) is a status that carries with it no rights at all. In fact, there used to be some adage about how cosigners were nothing more than Fools With Fountain Pens.

Responsibilities? You are 100% responsible for complete repayment of the loan.

If the lad makes the payments on time, a record of that may or may not show up on your credit report. It depends on the creditor. Not all of them report to cosigners' credit reports when payments are made on time. And it won't boost your credit score by much even if it does show up.

If he pays late or defaults on the loan, that information will most certainly show up on your report as a black mark.

And as a cosigner, you will then become liable for repayment. The lender can come after you as though you were the primary borrower; in other words, first. That's right, if you look like a deeper pocket, the lender can decide to give up on going after your son and sue you for payment instead. 

Also consider whether you plan to buy a house, car, or other asset on credit within the time period that your son is paying off this mortgage (which could be decades). Knowing of your liability on this debt, other lenders may refuse to make additional loans to you, on the grounds that you're overextended. 

For many in your position, the risks simply aren't worth the rewards.

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