I am considering co-signing on a mortgage with my nephew so he can buy a house.What happens if he cannot keep up the repayments,will the bank foreclose and sell the house or can they demand that i make the repayments ? Anyone had experience with co-signing or being a guarantor ?
Hi Coalfinger,
You and your nephew will be showing on contract as “jointly and severally liable” (read that as “jointly and separately liable” – it makes more sense that way). So, in a nutshell, you are each separately liable for the WHOLE AMOUNT of the mortgage, and for payments to it.Be sure this doesn’t screw up any proposed borrowings you might be planning – e.g. if you are wanting a personal loan for something – that loan might be out of reach after taking on this one !!!!!
Yes, the Bank can come to you if your nephew doesn’t make payments – and yes, foreclosure will be one option the Bank has.
Benny
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This reply was modified 8 years, 6 months ago by
Benny.
That’s correct – they certainly can foreclose and or require you to take on the debt. If this fails it will be on your credit file and can bring your personal assets into the mix.
Are you signing as a borrower or as a guarantor? Why does your nephew need you on the loan – doesn’t have enough deposit OR not enough income?
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
He wants to buy out his ex wife’s share & doesn’t have the required deposit or income to support the mortgage.I thought i could co-sign on the mortgage & then he & his new girlfriend could live in it for a while then rent it out.He could find cheaper rental digs & his girlfriend might get rent assistance while he claims depreciation & interest etc tax deductions on the near-new house.His girlfriend has young kids & she wants to return to work when they get older which means they could probably afford to move back into the house then.For my own protection i would like a contract that requires the bank to foreclose rather than go after me for the repayments,although as you said it could affect my credit rating.Maybe my nephew & i could sign a deed that requires him to sell the property if he falls behind on the repayments.I could help with the repayments until it sells.
I doubt you will find a lender willing to allow you to go on the mortgage or guarantee the loan if you are not on title to the property.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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This reply was modified 8 years, 6 months ago by
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