Season 1, Episode 3: “My Parents Have Bad Credit. Should I Help by Co-signing Their Mortgage?”

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Kitty  0:31
Oh, we need to engage in witty banter before we begin.

Piggy  0:35
I know I can swirl my whiskey glass tantalizingly, although my ice is mostly melted so I don’t know if you can hear that. Can you hear that?

Kitty  0:44
Yeah there’s a light clinking. It’s not like that deeply satisfying… You know I have poured myself an ice coffee while I’ve been on a day job call and everyone is like, oh have what Lauren’s having and I’m like, do you guys think first of all, do you think I’m some kind of cretin? Drinking a martini on the rocks, which is the wrong way to do it. But second of all, I’m like, why does everyone jumped to the idea that like, a drink that has ice in it at 10 o’clock in the morning? Oh it absolutely must be alcoholic. Oh, we’re so funny.

Piggy  1:21
So one of the fun things of getting old, as I’m sure you know, as a fellow old millennial is that I can’t drink as much as I used to, which is kind of embarrassing. We, as you know, live around the corner from the best little lesbian owned and operated brewery in my city, nay the world. And I go in there and said lesbians are all about, you know, just topping me off and pouring me more beer and I can’t keep up anymore. So it’s a little embarrassing that I can’t support my local business. But I guess it’s good for my wallet that like two and a half drinks in I’m like, I need to take a nap!

Kitty  2:00
I think those lesbians are like sizing you up and they know you are drunk bi-curious.

Piggy  2:08
They know me too well. They know me too well.

Kitty  2:24
Oh, well that’s pretty good witty banter. I’m Kitty.

Piggy  2:28
And I’m Piggy.

Kitty  2:29
We are the bitches in Bitches Get Riches

Piggy  2:31
And we are a rogue cult of nature worshipping misandrists crawling out of the woods all covered in blood.

Kitty  2:36
And we are here to give you a crown of elk antlers and welcome you into our dark sisterhood.

Piggy  2:42
Our time on this planet is limited.

Kitty  2:44
So let’s get started.

Piggy  2:45
Today’s letter comes to us from Reddit. And I’m just going to dive right in. I currently live with my parents (age 22) and they want to sell our house and move into another. My dad can’t be on it because his credit is low so it would be my mom as the primary and me as cosigner. I’m wondering if this is a good idea, because I’m pretty nervous about this. I don’t want to ruin my credit or be stuck on a 30 year loan. If I move out, can they take me off the mortgage? Thanks for any help.

Kitty  3:19
AHHHHHHH!!! Sometimes I read a letter and my heart starts racing because for personal finance nerd, which you and I both are, this letter is the equivalent of someone writing in like, I’m thinking of stepping onto train tracks. I don’t see a train, although I do hear a ding ding ding and the arms are down at the crossing and also someone says the 7:07 is right on time and it’s 7:06. Should I? My God, the stakes are so high. I need more deodorant.

Piggy  3:55
Okay, so let’s, I want to get some basic financial principles out of the way first, because I know and you know that a lot of our listeners, are we baby financial bitches and they might not be familiar with things like a 30 year loan or a mortgage or co signing or what that all means. So, real quick and real simplified…please don’t ask me more knowledgeable finance nerds, a mortgage is a loan you take out to get a house or another form of property that you live in generally. They usually take the form of a 15 year loan or a 30 year loan. Obviously, on a 15 year alone, your monthly payments are higher, but you will pay less interest over the long term because you’re getting it all out of the way faster. A 30 year loan will have lower monthly payments, but you’ll probably pay more interest in the long term because it’s a longer loan. Cosigning on a loan means that your credit report, your credit history, your credit score, all of those things you need to, for example, get a loan for a car or a student loan or a credit card or some other form of revolving credit or service credit or anything like that (more on our website BitchesGetRiches.com) cosigning on that means that your credit future is very wrapped up in this property. So for example, if our 22 year old baby broke bitch right here cosignes on this house with her mother, his or her mother, their mother – pronouns are hard. What do we have them? The cosign with their mother and their mother can no longer make the payments they will be legally on the hook for those mortgage payments, which for a house are pretty big.

Kitty  5:49
That’s a gigantic commitment,

Piggy  5:51
It’s a gigantic commitment and for 30 fucking years it’s a long time. So a bigger commitment. Dare I say that your student loans. Yeah, so I think we got all the basic concepts out of the way.

Kitty  6:04
That was a really good primer actually.

Piggy  6:06
Thanks – I write a financial blog.

Kitty  6:09
Haha – the way that cosigning usually works…I have a good example from my life. So when I was first moving in with my boyfriend who later became the husband.

Piggy  6:23
You like him. Did you like hold hands?

Kitty  6:27
We held hands and we kiss with our tongues.

Piggy  6:29
EW!  Gross!

Kitty  6:31
It is gross. But so when he and I were first moving in together, we were fresh out of college, maybe like 21 or 22 years old. And we were moving into an apartment with a landlord who was just a little bit nervous about the idea of renting to recent grads, but he met us and we seemed like a pretty chill species of recent grad, which was true. So he said, as long as your credit checks out, that’s fine. Everyone in the house their credit checked out except for my then boyfriend’s because it wasn’t that he had bad credit was just that he had no credit. He’d never had a credit card. He had no loans in his name – his parents had paid for his schooling. So it was just a big question mark of is your credit, good? Oh, you just don’t have it. So he needed to ask his parents to cosign for him so that he could find somewhere to live.

Piggy  7:31
Basically he could ride off of their established credit history, basically.

Kitty  7:36
Yes, his folks were coming in and saying, I know our son doesn’t have credit, but we will speak for him in a very real legal sense. If my boyfriend had stopped paying his rent, his parents would have been liable for it. So usually cosigning happens when someone who financially is less established needs help from someone who is more established. That’s what a lot of student loans are have a cosigner a lot of people’s first departments might have a cosigner or maybe their first credit card. But as you age, it’s not common to have a cosigner unless you have very bad credit. Sounds like is what’s going on with this letter writer.

Piggy  8:25
Yeah. Which is our first alarm bell, by the way, which is, you know, usually it’s the other way around parents cosigning for their children’s student loans or first apartments or first mortgages or something like that. The fact that the situation is reversed and the fact that his father or their father can’t even (I’m just weird to pronounce today, I’m sorry). Your father can’t even get on the mortgage because their credit’s so damaged that just…ahhhh!

Kitty  8:52
It got that way for a reason. And maybe those reasons are fairly benign and outside of his hands, maybe you know, there are sometimes things like divorce or unemployment or terrible medical stuff that can set someone’s credit back in a way that isn’t really an accurate representation of their fidelity as a repayer. But that said, this situation stinks. And please, please, please, like we’re burying the lead here, don’t do this. Don’t do it.

Piggy  9:29
Run away!

Kitty  9:33
In general, when you cosign a loan, or when someone cosigns a loan for you, it is the same as signing the loan. So you ask the question, if I move out, can they take me off the mortgage? No, you signed on the dotted line, you’re on there and your credit is on there. And if your parents ever hit a rough patch, and they’re not making their payments on time, it’s your credit that will be on the line. If they lapse on having homeowners insurance and someone is injured in the home, you could be liable. Like there are all sorts of terrible things that could happen if you are on the line for this and is there a way out of it? Like, no, you can’t go in front of a judge and say like, I know I signed with my legal ass signature. But I was young and my parents took advantage of me. It’s a shitty thing that they did, but it doesn’t get you out of that legal obligation.

Piggy  10:28
I do want to make one very important distinction, which is the economy is a dumpster fire and we know that a lot of our readers/listeners (hey we have podcast now guys, did you know that?) A lot of them are taking care of their parents, are you know, looking after elderly relatives or being the caretakers and the responsible financial party in their family for one reason or another which honestly, like I, I hate that this is where we are where our elderly population is, has poor credit and no assets and no retirement funds and is struggling and needs to be taken care of by the younger generation. That’s not how it should be. But that’s how it is. And it’s not – I’m not blaming our elders for that necessarily. I think a lot of you know, we’ve been reading in the news about these, you know, reverse mortgages where the elderly are getting taken advantage of by giant corporations, and it’s just wiping out generational wealth. That’s a whole other topic. My point being, it’s a wonderful thing if you are a young person who has taken responsibility financially for your family and is looking out for your parents. That is not something I mean to demean at all. The issue is that this young person needs to be completely aware of what this arrangement would mean for them and needs to be prepared if the worst should happen to take on that mortgage for their parents because it sounds like given the fact that their dad has such poor credit that he can’t even cosign on a loan for his own house and his mom needs a cosigner because her credit is so poor that it’s pretty likely that the parents will need financial assistance paying that mortgage and legally, this young person will be on the hook for that.

Kitty  12:29
When a bank says, We are not going to let you buy this house, we’re not going to lend you – let’s say, you know, we’re talking about $100,000 house. The bank looks at your credit history, they look at how many times did you miss a payment? How many times were you late? Did you ever default? Do you – what is your credit history? They kind of look at all this stuff. Whether it’s fair or not, which is a whole nother thing. They look at all this stuff. And then they say do we think this person is likely to pay us back this money in full and on time? And if the answer is yes, they’ll loan you the money and if the answer is no, they will not. Not without a cosigner and the question is so your dad letter writer is asking – I say letter writer, I culled this from Reddit.

You’re a letter snatcher. Letter snached. So your dad is using you because you are a blank slate and a blank slate is not a great thing to be from a credit perspective. But it’s still better than whatever he has, which is bad. So that’s the bank’s thing. I know what the risks and the rewards are and I’m saying I’m not doing it. That’s a pretty good indication that you yourself should not step in and do this and 22 years old is way, way too young to be making this kind of thing – your parents should not be putting you in this position by asking it all. I think I’ve known some, I say some, I think I’ve known quite a lot of people who’ve been in a position where their parents say, I’ll pay for your school, for example, take out student loans in your name, and I will pay you back for them. I’m actually one of those people. And my mother promised to give me $3,000 every year that I was in school towards my student loans that I took out in my name because she couldn’t take out anymore. Guess what happened? She didn’t. And there were a lot of reasons that she didn’t, she got very sick. That sickness included, unfortunately having to retire early. But also, she did not manage her money appropriately. And she used some of the money that I think should have gone to supporting her children on herself.

Piggy  15:00
How do you feel about your mother for sort of putting you in that position and making that promise and then having to go back on it?

Kitty  15:09
Oh, god, there’s no better way to ruin your relationship with a family member than by getting finances tangled up. It made me really angry. It made me really hurt. She did the same thing to my younger brother. She owes him over $10,000 from money that she borrowed. And we know that the reality of kind of her, so she is now mentally disabled in a way that makes it impossible for her to work. She doesn’t really have a short term memory anymore, and her long term memory is a little iffy. So I’ll never get like closure over that with her. I will never get to say like you really disappointed me. You let me down. You promised me something that you shouldn’t have promised me knowing that I didn’t plan to account for this money, but then had to because my parent had poor judgment. It’s a really painful situation. And I think it’s a very unwise and uncaring parent who lacks foresight and forethought, who puts their child in that kind of situation and, and kind of as a, as an addendum to anyone who may be listening who’s maybe much older than this letter snatched. Who is maybe themselves a parent or going to be a parent or even a grandparent…definitely, like, please always think about the fact that your financial choices can cause real heartache to your kids and your grandkids. This is a really serious consideration and getting to the point where you’re asking your children for financial help. That’s a really different question for a parent in their 40s to be asking a kid in their teens versus a parent in their 80s asking a child in their 40s. Those are really, really different stages of life.

Piggy  17:07
Absolutely. And I would argue, you know, it’s sucks that these parents are in the situation now. But they’re 22 year old child is more likely to be able to take care of them in their true old age if they don’t cosign this mortgage now,

Kitty  17:22
Exactly. It sounds like they’re signing up for more than they can chew in terms of this mortgage.

Piggy  17:27
I also want to say like, this is not a real problem necessarily, like it says, you know, they live with their parents who want to sell their house and move into another. Like, why do they need to sell a house? They have a house that they’re living in that presumably the 22 year old letter snatched is not on the mortgage for so I just I think we would need more information about why they even want to move, especially if the parents have such bad credit. So I would say the solution here is the parents shouldn’t move or if they are looking to downsize, they need to look into renting right now while they fix their credit so that they can get a mortgage on their own strengths and their own merits rather than potentially harming the credit of their 22 year old child.

Kitty  18:14
Agreed and to the letter snatched, I think if you are 22 and still living at home

Piggy  18:19
Pay rent!

Kitty  18:20
that’s a pretty good age to start paying rent

Piggy  18:22
Fuckin’ pay rent!

Kitty  18:23
If I were this person, probably the way I would frame this conversation is I’ve done some research and it sounds like it would be a really potentially fraught situation for me to cosign a loan with you so I’m going to decline. However, let’s talk about the fact that you know, I’m an adult now I should be out looking for work if I don’t already have it. I should be contributing to the household. Maybe right now, you could only do 100 bucks or 200 bucks. You can tip toe up to what is an appropriate amount, what they realistically could get if they were renting out your room. Let’s say that’s $500 a month, you can say like, I’m going to work so that by the time I’m 23, I will be prepared to start doing that. Does that make things more financially comfortable for you guys? Or would you like to go get your own apartment? That’s one bedroom smaller and I will find alternative living situations because I don’t want to cosign this long, but I also don’t want to be mooching on you past an age where it’s appropriate and expected that I do so.

Piggy  19:39
Yeah, yeah, I think I think that’s a great way of framing it. Like they’re there are ways for this 22 year old to help their parents and they should. But those ways can be with much lower risk to all parties involved than cosigning on a mortgage. Moving in with your parents as an as a legal adult you know, maybe after college or after some form of training and you’re getting your career going like you should contribute, you are no longer a child, you should lessen the burden on your parents who should be focusing on saving for their own retirement or in this case fixing their own credit, they could help pay down debt or or contribute to the mortgage or make sure bills are paid on time. That would be infinitely helpful to them in repairing their credit so that if they do want to downsize and move into a different house later on, they can do so on their own merit.

Kitty  20:35
Yeah and if you truly cannot contribute anything monetarily yet, girl the very least you better be washing them dishes, you better be scrubbing them bubbles in that bathroom like

Piggy  20:51
Make your parents dinner…

Kitty  20:51
If you cannot afford to pay rent like you would better be putting some kind of labor in that gives your, your parents or whoever you’re living with more of their day back to focus on their own problems. Because ultimately I think that’s what growing up is about is realizing that like, oh, you know, throughout your childhood, your parents are always sort of this never ending source of problem solving, and answers and solutions. And when you get older you realize that like, oh, that wasn’t like a magical quality that they had because they’re parents. They’re human beings, regular old human beings just like I am just older and bigger and they are solving a lot of problems invisibly.

Piggy  21:40
Yeah, absolutely.

Kitty  21:41
Um, are you good with that?

Piggy  21:42
I’m good with that. listeners.

Kitty  21:44
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Piggy  21:49
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Kitty  21:54
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Piggy  22:01
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Kitty  22:13
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Piggy  22:33
All right. So is there anything else they should know?

Kitty  22:37
Yes, everyone deserves at least two friends that they can text absolutely disgusting medical photos to. I have these crazy, itchy bright red splotches all over my thighs. And I immediately sent the photos out to a friend of mine and was like are these bedbugs? You had bed bugs once, is it but just like a no, it is most definitely a heat rash. And I was like, Oh, I did go horseback riding when it was really really hot and humid out in polyester pants. Thank you for solving that mystery and making it so that I can sleep at night and I don’t have to keep washing all of everything I own on super high heat.

Piggy  23:27
Good to know.

Kitty & Piggy  23:27
Bitches Out!

Huge thanks to Purple at A Purple Life for her help creating these transcripts!