Q: What are the pitfalls for a 72-year-old mother using her credit to buy a house in a different state for her 35-year-old son? My name would be on the title along with my son, but he would make the down payment and pay the lender every month. After a year, how would I remove my name? — Peggy
A: Whether you would be the only borrower on the loan or if you would co-sign a loan with your son, you would have to make the payments if your son does not.
It is not a good idea to owe money on a home you cannot control without the consent of another owner who is not legally required to repay the loan.
Anytime you co-own property with someone you are not married to, you should have a written joint ownership agreement. This contract dictates what happens in various scenarios, such as if only one of you wants to sell or if one owner does not pay their share of the expense.
This agreement is even more important if not all the owners are borrowers on the mortgage loan.
When I bring this topic up, I am often met with resistance, being told that a beloved family member would never do anything like that.
Unfortunately, this is not the case, and any lawyer can tell you that disputes between family members are common and often brutal.
Preparing a written agreement can help avoid a misunderstanding later. Even if both parties have the best intentions, the everyday magic of putting pen to paper will help prevent misunderstandings.
When applying for any loan, it is illegal to misrepresent facts or intentions to the prospective lender. This means you must inform the lender you will not be living in the home, which may cause your interest rate to be higher than if the loan was for residence.
Most mortgage loans have a “due on clause” requiring the loan to be repaid if the borrower deeds the property to someone else.
If you go forward with your plan, have your son refinance the mortgage before taking yourself off the title.
