Should you co-sign for your kids?

Before you put your John Hancock on that mortgage form, make sure you truly understand your child’s financial situation.



From the September/October 2012 issue of the magazine.


If you’re a parent of a young adult whose home ownership dreams have been dashed, there is a way to help. In June, the maximum amortization period for insured mortgages was reduced from 30 to 25 years, making it even more difficult to manage monthly payments. But having a parent co-sign on the dotted line allows adult children with lower salaries to get into the housing market. It’s a trend that mortgage broker Scott Dawson expects to increase in response to the new rules. But is it a good idea?

Before you put your John Hancock on that mortgage form, make sure you truly understand your child’s financial situation. “There’s a power dynamic that exists when a parent is heavily involved with a child’s financial life,” say Karin Mizgala, CEO of Money Coaches Canada. “It’s only advisable if you truly trust your child and know for certain that he or she is responsible with money.”

If the child doesn’t pay the bills the relationship can be ruined, since the parent is on the hook, Mizgala warns. Parents also have to be in good financial shape themselves: if Mom or Dad has too many debts or bad credit, the lender will deny the loan, which could be embarrassing. Instead, Mizgala advises both parents and kids to be patient and wait until the child is able to qualify on his or her own. “To qualify for a mortgage,” she says, “someone should be able to stand on their own two feet.”

3 comments on “Should you co-sign for your kids?

  1. My dad co-signed for my mortgage while I deal with some bad financial decisions I made in college. The plan was to buy a home and rent out two of the rooms to friends. While my dad was able to take that into consideration, the bank did not. It was necessary for him to co-sign, and now the rental income is making a huge dent in my debt.


  2. My parents co-signed for my student loan and I would have not been able to attend school if they hadn't. However, I think for a mortgage home ownership can wait. If you cannot afford the home yourself, you should not be purchasing it. Continue to rent until you can save up enough to buy. Not to mention if something happens, the parents are on the line for the cash.


  3. I think co-signing for your kids is a simple reality as the barriers of entry to owning a home would otherwise be unsurmountable for many.


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