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Bring me back to reality or tell me it's okay

January 8th, 2013 at 03:28 pm

Disclosure: Our son never asked us to do this! Here it goes...DS #1 has an opportunity to purchase a really nice townhouse for a very reasonable price. He has some money put away but not enough to qualify for the loan on his own. We ("The parents in us") thought of refinancing our home to get the cash out to enable him to buy the townhouse out right and then pay us his portion of the refinance to us. But the other side of me tells me "Don't do it!" If we refinance we will be going to a 30 year mortgage. Our existing loan only has 4 years left if we do not pay any extra principal. What do you think?

16 Responses to “Bring me back to reality or tell me it's okay”

  1. Jenn Says:

    I wouldn't do it, even if he's a responsible kid. He's not ready and you'd be robbing him of the opportunity to experience the sense of accomplishment that comes with saving and doing it himself. It'll happen one day, and these 'missed opportunities' will be the reminders he needs to keep saving.

  2. Petunia 100 Says:

    I think banks will let you borrow more than you can comfortably repay. If they say the mortgage would be too big for him, chances are good that the mortgage would be too big for him. Smile

  3. Ladya70 Says:

    Slowly back away and come into the light...don't do it!

  4. wowitsawonderfullife Says:

    Um, let me think about it... OK, now RUN! Far, far, away. If you were mortgage free and the car and truck payments were gone then you could consider giving him monthly loans. But if he doesn't have enought to qualify on his own then I wouldn't do it. As well, I'm assuming you are in your 40's or 50's - do you really want to have a mortgage in your 70's or 80's? In my humble opinion no one should retire if they still have a mortgage. Just my thoughts. And please remind me of this response when I ask the same question for my son in a few years.

  5. creditcardfree Says:

    I think you also should not do this deal. It is not that it is terribly risky, it is that you have a goal...you have been super focused. Stay with it. Dave Ramsey would say...if you had a home that was paid for, would you take a loan out on it to buy this property? Probably not. However, if your house was paid for, I think it would be okay to use extra cash to buy the house or help your son if you were able.

  6. monkeymama Says:

    Agreed with Jenn.

    Middle ground would be gifting him money to help. *Never* lend money. Or co-sign a loan.

    My overall feeling with your situation, and what you have said in your blog, is that you have worked so hard on paying off your house, that you need to finish that. Too often, helping someone substantially to get a *great deal,* only hurts them because they are not ready for the responsibility.

    If you can feel comfortable gifting the money, is a whole other thing, but similar concerns. Plus, then you'd probably feel you'd have to do the same for other son - so gets complicated. {If you have to refinance to gift the money, then I don't think you should. Having extra money laying around, or a long thought out gift is totally different from a more rash decision - the red flag is this would appear very rash}.

    P.S. Agreed with everyone, but I took my time thinking about this a bit! Big Grin Several more postings before I hit send...

  7. scfr Says:

    Come back to reality ... It is not the last good deal on a town house. When he is financially ready, there will be others available.

  8. ThriftoRama Says:

    Is there any way you could just gift or loan him the rest of the money he needs for the downpayment? Seems like the wiser choice. A gift to get him headed in the right direction, while still instilling responsibility.

  9. LuckyRobin Says:

    I've been trying to figure out how to word this. Unless they are extremely rare individuals, I think that adult children who are given things don't learn the life skills necessary to be responsible with debt. I think it makes them more careless because it is other people's money and not their own. I think it generally leads to thinking like this: Mom and Dad rescued me by giving me the downpayment, they'll rescue me when I can't make my monthly payments or pay them back for the downpayment." Meanwhile you've trapped yourself into more debt. You might think your kid would never do that, that he is too responsible to do that, but if he is that responsible, then he needs to do the responsible thing and save for it on his own. And have the emergency fund in place that being a homeowner requires.

  10. Firstofmanysteps Says:

    I agree with your other side. Don't do it.

  11. PNW mom Says:

    I have to agree with everyone....from reading your blog for a while now, I know both of your son's seem to be extremely responsible. But, you have worked so hard to get where you are today with paying your debts down and almost becoming debt free. I agree with MM......if you feel moved, go ahead and gift him some money, but not at the expense of refinancing your house.

  12. PauletteGoddard Says:

    Weigh the potential "regret impact." I'm joining the chorus here and saying that this is not the best reason for refinancing your house.

  13. frugaltexan75 Says:

    Ditto - don't do it.

  14. Wino Says:

    Though it's just an echo of what the others have said, I say don't do it.

    One thing I've found while planning for our next house purchase is that good deals come along every day. If he's responsible, there will be another good deal when he's ready and able to pay for it. Just keep telling him NOT to get his heart set on one and only one piece of real estate. As long as he's flexible, he'll find what he wants at a good price.

    And ALWAYS ask to pay "less than you think it's worth." The time to make money on real estate is when you BUY it for less than it's worth. You'd be surprised how much less you can pay than what is asked. Donald Trump - one of the times he wasn't bankrupt - said that's how he's made his money, and I believe he is correct. I've made no less than 100% profit on the last two homes I've sold, much of it by buying below the price the realtor suggested I offer.

  15. NJDebbie Says:

    I'm not going through the refi. Thank you for your input, you are right. My quest of a debt-free life continues.

  16. -Jerry- Says:

    I agree (belatedly) with the above. This is not the last house that will present itself as a good deal for your son, and if he is able to lead himself into home ownership on his own he will have the insurance of it meaning a whole lot more to him. Good choice (and great advice from the SA crowd, huh?). Wink Jerry

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