We are five years from retirement and our house is paid for. Our son just asked us to co-sign a loan so he can buy his first home. Is this a risky move? – PROUD PARENTS
DEAR PARENTS: I suspect requests like these from young adults will become increasingly common as housing prices rise and the government stress test makes it harder for new buyers to qualify for mortgages on their own.
Luckily, it sounds like you’re in a good financial position. You’re heading into retirement with little or no debt, which is ideal. Co-signing on your son’s loan will use up a bit of your credit, but it’s unlikely to impact your retirement plans five years from now. If you feel your son is qualified for home ownership, you have a decision to make. I suggest you sit down with him and his mortgage specialist to review exactly what co-signing might entail for both of you.
Twenty-five or 30 years ago, it was somewhat common for a new buyer to have their parents co-sign on their mortgage. Interest rates were higher back then and mortgage approval required a 25 percent down payment. At the time, parents were co-signing on three to five-year mortgages with the expectation that their child would be able to qualify on their own by the time the term came up for renewal.
PRO TIP: I advise all my new buyers to get into the real estate market as soon as they can afford it. In Waterloo Region, prices are rising and affordability is shrinking with each passing year. Sometimes, a helping hand from the bank of mom and dad can keep a child’s dream of home ownership within reach.
We’re getting ready to sell our $850,000 home. The wall-to-wall carpet upstairs is 20 years old and is showing its age. What’s the most cost-effective way to fix this problem? – FLOORED
DEAR FLOORED: Whether it’s damaged or “dusty rose”, tired carpet can really throw a buyer off (with apologies to those who prefer floral hues). Outdated styles, wear and tear or pet damage can give an otherwise outstanding home an air of neglect. You’re wise to consider replacing the carpet before you list, since it’s one of those projects that buyers tend to perceive as expensive and complicated, even though it isn’t.
New carpet makes sense from an economic standpoint. Hardwood has nearly universal appeal, but is a lot more expensive. Meanwhile, 99-cent per square foot laminate is definitely not hardwood and won’t cut it in this price range. I generally recommend installing a neutral, less-expensive carpet with good-quality underpad. It’ll give your upper floor an immediate boost and a tidy appearance for about $3.50 per square foot.
PRO TIP: Carpeting is a low investment, high impact update that can be installed in a day or two. Everybody loves hardwood in theory, but with a hefty price tag and thousands of variations to choose from, you risk making a design statement that a buyer may not appreciate. #AskDavid #Advice