Dangers of Co-Signing A Loan For Your Boyfriend
Q: I have a complicated real estate question for you. My boyfriend is recently divorced. He needs to refinance his mortgage to buy out his ex-spouse, as per his divorce agreement.
They have agreed upon this however, he is unable to refinance without a co-signer, namely, me. His lender will not allow me to co-sign unless my name is on the deed and of course his ex does not want him to put me on the deed.
Can he put me on the deed without her permission? What are the implications for me if I co-sign the mortgage but do not go on the deed? Can we use a quit claim deed to put my name on the property after?
I have researched quit claim deeds and cannot find the answer to this.
A: Your question is not very complicated. First, your boyfriend’s ex-spouse cannot prevent you from being on the title to the property. She’s given up the right to dictate the terms of your boyfriend’s life.
But there are some significant issues you should think about with regard to co-signing the mortgage. Once you co-sign the mortgage with your boyfriend, you and he will be connected by this real estate deal.
If he fails to make payments on the mortgage, your credit will be hurt. If you and he break up, you won’t be able to get your name off the mortgage unless he refinances the home.
Co-signing a mortgage is an important decision to make and you should make sure you are in a committed long term relationship. You must consider what would happen if you and he do terminate the relationship under less than pleasant conditions.
Years ago when real estate was hot, people bought homes together and if there were problems they were easily able to get out of the home, sell it and split the money. Frequently, they made a good profit.
These days, homeowners might take a loss upon the sale of a home, and it could take months or even years until you find a buyer. You need to understand the consequences of buying a home with your boyfriend, particularly if you don’t have plans to marry soon.
If you have thought through the issues of the relationship, any possible breakup and how you and he would handle the home upon that breakup, you should then have a document put together that formalizes what would happen in that scenario.
It may be that he’s putting up all the money to buy the home, but it’s your credit that he’s using to get the loan. You’re bringing a lot to the table and taking a big risk. If you co-sign the loan, you should be an owner of the property.
If he doesn’t agree to recognize your contribution to the deal, you and he might be better off renting a home until the two of you decide to get married and buy a new home together.
You shouldn’t co-sign a loan and not be on the title to the home. You should know that in some states, the lender can come after you alone for repayment on the loan should your boyfriend fail to make the payments. You need to be on title to protect your interests.
If your name is on title, the home can’t be sold unless you sign the sale documents. If your name is on the title, the loan on the home can’t be refinanced unless you sign the refinance loan documents.
Are you prepared for the obligation to own a home? If you aren’t ready, don’t put your name on the documents. Your boyfriend should either sell or rent the property and you and he should rent.