Monetary loan

Does co-signing a home loan affect my estate if I die?

Our goal at Credible Operations, Inc., NMLS Number 1681276, hereafter referred to as “Credible”, is to give you the tools and confidence you need to improve your finances. Although we promote the products of our partner lenders who pay us for our services, all opinions are our own.

The Credible Money Coach provides insight into what happens to a mortgage after a co-signer dies. (Credible)

Dear Credible Money Coach,

If you co-sign a home loan, will it affect your estate after you die? – Philip

Hello Philippe and thank you for your question. Knowing what will happen to your estate is a wise way to take care of loved ones who will inherit your property after you die.

Co-sign a mortgage can be a great way to help someone buy a home. They may need a co-signer to get approved if they have bad credit or low income. In addition, co-signing can allow a primary borrower to obtain a lower rate mortgage interest rate than they could on their own.

But co-signing a credit account comes with risks. The primary borrower could make late payments or default. In this case, the credit of both co-signers would suffer. In addition, the two co-signers are also responsible for repaying a debt, which could be passed on to your estate.

When a co-signer becomes bound by a mortgage

As a co-signer on a mortgage, you must repay it if the primary borrower stops making payments. So as long as the primary borrower continues to pay the mortgage after you die, your estate is unlikely to be at risk.

However, if a co-signed mortgage assigns liability to your estate and the primary borrower stops making payments, the lender may require your estate to make payments.

Consult a lawyer to fully understand how co-signing a loan could affect your estate.

Consider an FHA Loan

If a primary borrower cannot qualify for a conventional mortgage, one option is to apply for a FHA loan. Some lenders approve borrowers with credit scores as low as 500 if they can deposit 10%. The down payment can be as low as 3.5% with a higher credit score.

Always buy and compare several offers to find the best mortgage rate before co-signing a loan.

Ready to know more? Check out these articles…

Need Credible® advice for a money-related question? Email our credible financial coaches at [email protected]. A Money Coach could answer your question in a future column.

This article is intended for general information and entertainment purposes. Use of this site does not create a professional-client relationship. Any information found on or derived from this website should not replace and should not be taken as legal, tax, real estate, financial, risk management or other professional advice. If you require such advice, please consult a licensed or competent professional before taking any action.

About the Author: Laura Adams is a personal finance and small business expert, award-winning author and host of silver girl, a weekly audio podcast and top notch blog. She is frequently quoted in the national media and millions of readers and listeners benefit from her practical financial advice. Laura’s mission is to empower consumers to live richer lives through her work as a speaker, spokesperson and advocate. She earned an MBA from the University of Florida and lives in Vero Beach, Florida. Follow her on, instagram, Facebook, Twitterand LinkedIn.