Hey PF,
I'll try and be brief. I know this title makes people scream "NO" and this is my default stance on co-signing unless you are confident you can pay the entire loan but I will lay out the situation.
My parents are retired and selling their house (fully paid off), they hoped to get 900k but are dropping it to 850k in hopes of selling quickly. They made an uncharacteristically bad financial decision to purchase a 350k house for retirement a few hours away, thinking they would have no problem getting a loan from the bank until they sell the house.
Problem is now the bank will not front them the 120k they need to purchase this new house. I know pulling out of the new house now would have considerable repercussions but I'm not savvy with the details. Here are their current options in no particular order:
- Cash out all of their assets including RRSP (terrible decision in my mind and they also understand this is worst case) to close the new house until theirs sells.
- Apply for some sort of high-interest loan, and pay it off when they sell this house.
- I co-sign on the 120k loan, and when they sell the house they pay off the entire loan.
- Back out of their new house (I'm not exactly sure of the repercussions, they made it seem like it would cost more than cashing out their RRSP. I'll speak to them again and look into this)
I've discussed these options with them already, and I told them I wouldn't be willing to co-sign for a number of reasons. I've surfed PF enough to know why this is a bad decision and my gut told me no. They are very understanding of this. I know this isn't r/relationships but it hurts to have my parents who have always helped me out greatly, lose so much on their RRSP when I could save them this money by co-signing. Also as a side note they are planning on giving me a significant amount of money when they sell the house which makes it feel even worse to say no and expect that money.
My situation is fine, I'm working full time living with my GF who is working 30+ hours a week atm and we are trying to save money for a down payment. I have 16K left on my car loan, she has 14K in student loans and we have about 15K saved.
I always try an assume worst case scenario, so if they can't sell the house and I have co-signed on a loan I know worst case they would just cash out assets and RRSP to pay off the loan so I don't have to pay it.
It seems to me best case they sell this house soon, and they can just pay off the 120k loan in one go.
In order to ease my mind I had some questions:
- If I co-sign, they pay off the debt when they sell the house, does this help my credit?
- If the loan is paid off within a month or two, would this still affect my credit if I were to apply for a loan/apartment/mortgage? I understand it will still show on my credit report, but I was wondering how this works if it shows as being fully paid off.
- Do they have any other options I am missing?
Thanks for reading and I appreciate any input.
Submitted June 26, 2017 at 09:35AM by throw_away_198713 http://ift.tt/2sdzUM5
