The Situation:

Recently, a client came to me seeking advice on whether to co-sign on a mortgage for her son to purchase a house. He is going through a divorce and currently living in an apartment. The divorce has not yet been settled but he is wanting to get into a more permanent living situation.

Over the years he has reached out to his parents for financial assistance from time to time. He purchased a new truck for himself, while being provided a company car by his employer. Also, last year she gave each of her children a one-time gift. He chose to take a boat that she was going to sell rather than the money.

He did not ask her to co-sign the loan but rather said, “Mom, I’m going to need you to co-sign a loan for me.” This bothered her so much that she was crying in my office. She said that he views her as safety net. The other children, which happen to be younger, are standing firm on their own as adults and have never ask for money. 

The Options:

Here are some of the options that we discussed:

1. She could co-sign the loan as he requested. Her risk would be that if he did not make the payments she would be liable and late payments could affect her credit record. She may end up with a house that she does not want.

2. She could personally mortgage the house and lend him the money directly as if she were the bank.

3. She could let her son work through this issue himself. This may involve him continuing to rent.

My recommendation was to not lend him the money or co-sign the loan. He can simply continue to rent until he saves up enough for down payment and rebuild his own credit. This is very feasible over time. By co-signing or lending him the money she would continue to enable his thought that she was his safety net. It could cause ongoing tension and may also change their relationship forever.

Our Answer:

Family is more important than money or material possessions. Bailing children out of life’s hardships is often not healthy. Letting adult children go through their own struggles and giving them the opportunity to grow and learn is often the best choice.

“Comfort is the enemy of growth.” Dennis Prager