Should Parents Co-Sign a Mortgage for Their Kids in 2025? The Risks No One Talks About

With today’s housing market still competitive and mortgage rates fluctuating, many young buyers are struggling to qualify for a home loan on their own. For this reason, it’s increasingly common for parents to step in and co-sign a mortgage to help their children achieve homeownership.

But co-signing is more than a gesture of support—it is a serious legal and financial commitment. Before you agree to sign, it’s important to understand exactly what being a co-signer means, the risks involved, and how it may affect your financial future.

What Does It Mean to Co-Sign a Mortgage?

When a parent co-signs a mortgage, their name appears on the loan agreement and sometimes on the property deed. This makes the co-signing parent legally responsible for the mortgage.

Key points to keep in mind:

• Equal Responsibility: You are treated as a borrower, not just a guarantor. If your child cannot pay, you are fully obligated to cover the mortgage.

• Credit Impact: The mortgage appears on both your child’s credit report and yours. Any missed payments will affect your credit score directly.

• Property Rights: If your name is also added to the deed, you become a legal co-owner. That means you must participate in future decisions, such as refinancing or selling the home.

The Risks of Co-Signing in 2025

While co-signing can help your child qualify for a mortgage in today’s stricter lending environment, it carries substantial risks:

1. Financial Liability – If your child defaults, lenders will pursue you for missed payments. With average mortgage balances higher in 2025 due to rising home prices, this is not a minor obligation.

2. Debt-to-Income Ratio (DTI) Impact – A co-signed mortgage counts against your borrowing capacity. This could affect your ability to refinance your own home, purchase another property, or even take out a car loan.

3. Possible Tax Implications – If your name is on the deed and the home is later sold, you may owe capital gains taxes on your share of the profit.

4. Long-Term Commitment – You generally cannot remove yourself from the loan unless your child refinances, which might be challenging given interest rate trends and lending requirements in 2025.

5. Credit Score Risk – Even one missed payment by your child is recorded on your credit report, potentially lowering your score for years.

Why Parents Choose to Co-Sign

Despite the risks, many parents still choose to co-sign because:

• Their child has limited credit history or insufficient income on paper.

• Home prices in areas like Washington state remain high, making it difficult for first-time buyers to qualify alone.

• They want to help their child build stability by entering the housing market sooner rather than later.

According to the National Association of Realtors (2024 data), nearly 25% of first-time homebuyers received financial help from family members—whether through gifts, co-signing, or joint ownership.

Questions Parents Should Ask Before Co-Signing

If you’re considering helping your child by co-signing, ask yourself:

• Can I realistically afford to make the mortgage payments if my child cannot?

• Am I prepared to be legally tied to this property indefinitely?

• Will this affect my retirement planning, savings goals, or borrowing power?

• Do I fully understand the tax and legal consequences of co-ownership?

• If my child stays in the home for years who will get the equity? Do they repay us the downpayment amount?

Alternatives to Co-Signing

Before committing, consider exploring alternatives:

• Gift of Equity or Cash for Down Payment – Helping your child build a larger down payment may allow them to qualify without a co-signer.

• FHA or USDA Loans – These government-backed mortgages often have lower credit requirements and might reduce the need for a co-signer.

• Co-Borrowing Without Co-Owning – In some cases, you may co-sign without being placed on the deed, limiting your ownership exposure. Always review the lender’s requirements carefully.

Final Thoughts for Parents in 2025

Co-signing a mortgage can be a valuable way to help your child become a homeowner, but it comes with lasting responsibilities and risks. In one recent case we assisted, a young homeowner was surprised to learn her parents not only had to approve her condo sale but were also legally tied to the transaction because they were on both the loan and the title.

If you’re considering co-signing, weigh the benefits of supporting your child against the financial, legal, and emotional risks. It’s wise to discuss the decision with a financial advisor, tax professional, and real estate attorney before signing anything.

At Rethinking Real Estate, we regularly help families navigate these complex situations—whether it’s before you sign or years later when it’s time to sell. If you’re thinking about co-signing (or unwinding a co-signed mortgage), we can guide you through your options.

🌟 Your Next Step: Let’s Talk

Ready to take the first step?
📞 Call or text me anytime. 253-255-5966 Let’s turn your fears into confidence—and your home’s equity into freedom.

Because your next chapter should be about joy—not worry. 💛

Susie | Real Estate Agent Serving Retirees in Washington for 20+ Years

P.S. Curious about your home’s value? Ask me for a free, no-obligation assessment today. 253-255-5966