Q: I was wondering what legal action could be taken if the person living in the home is on the home title but not on the mortgage loan. I recently helped my mother-in-law refinance to bring her monthly mortgage payment down, and due to recent events I now fear she’ll either be late on payments or skip payments entirely.
A: We’ve written frequently about this issue in the past, and we always tell our readers to be extremely careful before deciding to co-sign a loan for a friend or a family member.
When you co-sign a loan, you are taking on all of the responsibilities for making all of the payments on the loan, not a proportionate share based on your ownership share.
You are right, by the way. If your mother-in-law fails to make a payment or pays late, you are legally responsible for making the entire payment. Your credit and your mother-in-law's credit will suffer.
Now that you've signed, it sounds like you have some regrets about co-signing. Unfortunately, the only way you can now get out from under the loan is to have your mother-in-law refinance the loan again and have only her sign the loan documents. She would then be the only borrower, and you would no longer be on the loan.
But it sounds like she's having serious financial difficulties, which will probably make it difficult, if not impossible, for her to refinance. We assume, however, that you are a part owner of the home. Another way to get out from under the home is to sell the home and pay off the debt. Your mother-in-law could then rent a home and not have the burdens of paying the mortgage, real estate taxes, insurance and upkeep on the property.
If you're trying to help your mother-in-law make her payments on time, she could consider renting a room out to a tenant or finding another job or source or income to help bring in more cash. You could also have your mother-in-law pay you the monthly mortgage payment each month and you would make the payment on time. That way you'd know that her bills are being paid on time and your own credit won't be threatened.
Unfortunately, this situation could lead to your mother-in-law stopping her payments and you being left on the hook. But again, at least in this unfortunate scenario, you'd have control over when bills get paid.
These are the most common solutions to your situation, and you’d have to consult an attorney on any legal actions that might be available to you.
Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, an app employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through her website, ThinkGlink.com.