Dear Penny: Am I a Bad Mom if I Don’t Co-sign My Daughter’s $800K Mortgage?
My 25-year-old daughter moved back home while I was taking care of my mom, who has Alzheimer’s. Because I wasn’t staying there, she never paid rent, but she did pay for internet and gas.
Well, now things are progressing, and I will be selling my mom’s home. I am currently having a room built at my home, since she will be staying there as well.
I have always helped out my kids as a single mom. But my daughter listens to her paternal grandmother, who sadly told her to have me co-sign on a mortgage for her even though she just started working and wants an $800,000 house. I told her NO.
I then said her grandmother knows that this is an unrealistic request. I’m about to retire in three years, if not sooner, and still have my own very manageable mortgage. I’ll have a pension and Social Security with only a leased car to pay for.
Now they are thinking of asking me again in a year or so to co-sign. Am I wrong to tell her no? I’m also thinking about selling the house and moving with my mom back East where she grew up to be closer to her aging brothers and sister.
Now my daughter is upset and says she won’t have anywhere to go if I don’t help her get a mortgage. Am I wrong to focus more on me and my mother at this time in our lives?
I’ve done all I can for my daughter, but I don’t like the guilt trip she and her dad’s mom are trying to put on me. I know she can’t afford an apartment by herself in California, but that’s not my fault either.
Your daughter isn’t the only person struggling with the cost of housing these days. No one knows what the solution is. But I’m pretty sure it’s not for moms to swoop in and co-sign so that their grown children can buy overpriced homes.
If you think you’re frustrated now, imagine how you’ll feel when you’re on the hook for an $800,000 mortgage. I say “when,” rather than “if,” because of the high likelihood that your daughter can’t afford payments on a loan of this size. Not many 25-year-olds can afford that much house on an entry-level salary.
I’m not sure what the deal is with your daughter and her grandmother. Maybe Grandma wants to set you up as the bad guy. But it’s also possible that Grandma doesn’t understand how serious the consequences can be when co-signing goes awry.
It really doesn’t matter what your daughter’s grandmother thinks. It’s your money and your credit on the line. Of course, that won’t stop her from having an opinion about how you use your money and credit. But you really shouldn’t spend any of your energy worrying about whatever nonsense she’s telling your daughter.
In case you need affirmation of your decision, here’s why you’re making the right call by saying no: Obviously, a liability of this amount could jeopardize your retirement. But even if your daughter makes the payments as promised, co-signing her mortgage could make it harder for you to borrow money. Lenders consider your debt-to-income ratio in their decisions, and this mortgage would count as if it were your own because you’re legally on the hook for it.
But this isn’t just about your retirement. You’d be doing your daughter a big disservice by co-signing on a home she can’t afford. We build grit by not getting whatever we want whenever we want it. Plus, learning to live on less is far easier at 25 than it will be at 35 or 45.
I’ll give you permission to have this discussion one more time to make sure everything’s crystal clear. Most importantly, be sure you’ve told your daughter that your answer will still be an all-caps “NO” one year from now. Tell her this is the last time you’re having this discussion.
If she brings it up again, tell her, “I’m not going to discuss this with you.” Repeat again as necessary, even if that means you have to walk out of the room.
As for what to do about your living situation, make your decision based on what’s right for you and your mother. Your daughter has plenty of options for finding a place to live. If she’s still living with you, she can start saving part of her paycheck while she’s not paying rent. She could also get roommates, take on a side hustle, or move to a less-expensive state.
Your mother’s care and your own impending retirement should be your focus right now. Your daughter doesn’t need an $800,000 house. What she needs is to learn how to act like an adult. She’ll get there faster if you focus less on her needs right now, not more.
Editor’s note: Dear Penny is on vacation this week. This column originally ran June 30, 2021.
Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to [email protected].