Home Equity Line of Credit

[Reldon]

Hi,

My mom co-signed on the house we currently own. Currently, I am the one making payments on the house. My mom recently told me she wants to take out a HELOC on our house. Since I am a co-signer, I also have to approve it. My question is, if I do not take money out from the HELOC and my mom does, will I be in trouble if the money isn't taken out?

I talked to the person who is doing the HELOC and he says I wouldn't be effected since my mom would be the one to take the money but I want to be sure. I am not really familar with HELOC except I hear it should not be done.

Thanks

[gackle]

Caveat: I am not a financial expert and know nothing about HELOCs.

Two things stuck out at me: First, it sounds to me like your mom would be getting the sweet end of the deal on this one. She is making no payments on the house and she wants to take out a loan on the house? Uhh, no!

Second, don't trust the person doing the HELOC. It doesn't make sense that you would not be affected by it if you have to approve it. All he wants is your money because that's his line of business. Do your own research on this. If you need to, utilize a third party that's knowledgable in this area that has no interest in the deal.

[jIM_Ohio]

Originally Posted by Reldon

Hi,

My mom co-signed on the house we currently own. Currently, I am the one making payments on the house. My mom recently told me she wants to take out a HELOC on our house. Since I am a co-signer, I also have to approve it. My question is, if I do not take money out from the HELOC and my mom does, will I be in trouble if the money isn't taken out?

I talked to the person who is doing the HELOC and he says I wouldn't be effected since my mom would be the one to take the money but I want to be sure. I am not really familar with HELOC except I hear it should not be done.

Thanks

One more reason not to use family to cosign... this is a tough spot. She helped you get the house, and now she wants money (cash out) of an asset she has not paid for.

If this were my family (hitting me up for money), I would say "he77 no" and walk away or hang up quickly. No need for me to ask questions...

But if I were to ask questions here is what I'm after:

1) what is loan being used for? If vacation, "he77 NO". If car "he77 no". If it's anything which does not have collateral "he77 no" unless it's medical expenses, then I might listen for another 30 seconds.

2) What is the pay back plan? Does your mother work, and can she afford to repay the loan within 5 years? If someone takes out a loan against your HOME, the house you LIVE IN, which could possibly put your family ON THE STREET and affect your livelihood, I would ask for it to be repaid in full within 5 years. If "life happens", you still have another 5-10 years to repay this.

3) HELOCS could be 5 year, 10 year, 15 year, 30 year. The product I am familiar with is a 15 yr ARM, prime +1. Adjusts once a year, first 5 years are interest only, loan ammortizes after year 5 for next 10 (could be a HUGE jump in payment). This could get to be as bad as a credit card payment. BE CARFEUL on terms.

4) Can your mother get money somewhere else? If she has income to pay off HELOC in 5 years, how come she'll put your home, your family, at risk?

5) I would be careful, who's to say another family member won't ask you for a"loan" after your mother?

6) Do you plan to move soon? If yes, answer is "he77 no". If not, consider that selling the house before loan is paid off will be money out of your pocket. If you had to sell and were'nt planning on it, you'll need every penny to deal with the circumstance which forced you to sell.

Forgive my cynicism... money and family to me DO NOT mix.

[Ima saver]

I agree with Jim, I am afraid I would have to tell my mother, no!!

[simpleyme]

you would be in trouble if the loan is not paid back since you could lose your house,or at least you would have to make her heloc loan payments

[bjl584]

Both your names are on the loan. Yours and your Mom's since she co-signed. If there is a default, a creditor has the legal right to go after whichever party that they have the best chance of receiving money from. Therefore, if your Mom defaults, then there is a good chance that the bank will come after you.