If You Have Paid One Mortgage Off Can You Help Someone Else Out By Cosigning For Another Home?

Cosigning means using your good credit to help your someone else qualify for a loan. Be careful about cosigning especially with family or friends because when you co-sign for a loan, you're also responsible for it. Consider what could happen if the other party failed to pay the mortgage... the house could go into foreclosure. Why would you want to risk your good credit for someone else who may not have a good credit rating?

It is important to note that you would have to be able to qualify for the loan in the debt-to-income ratio and have the credit to qualify for the loan.

An alternative to cosigning is for you to take full ownership of the property and then sell the house to the other person under a contract. In this case the other party could have a certain amount of time (maybe 2 years) to purchase the property for an agreed price by refinancing the existing loan into his or her name. The contract could include a clause whereby the selling price is increased by 10% per year to give the other party the incentive to refinance as soon as possible. The other party could then get ownership when he or she acts in accordance with the contract terms and conditions. The other party would make payments to you and you would pay the mortgage.

Always seek professional legal and financial advice before entering into any legally binding contract. This is especially so if there is a risk of damaging your financial position or your your good credit record. Remember too, that refinancing an existing loan is usually much quicker and easier than arranging a new loan.

In summary, you can cosign, but YOU ARE LIABLE for the loan. This is a serious matter, don't just seek help from this site, consult legal, financial/credit and tax professionals.