Family member/renter co-signing on a loan

3 Replies

Hello! I have a property that my Mother in law is staying at currently, but I lived in for a few years prior to my marriage and have some equity built up unit. We are wanting to do a cash out refinance to pull some money out of it to purchase another rental. I received some advice on having my mother in law co-sign on the lease so that we could list it as a primary residence to pull more money out. My question is would we still be able to treat it as a rental for tax purposes? How does the impact my mother in law?

Thank you all in advance!

A lease with your mother-in-law wouldn't make it a primary for you.  Talk to a loan officer but if she is on the title and a co-applicant for the loan,  it is her primary, and you could get more money that way but I don't think you want to get into that. 

A written lease with her could support the income it is bringing in. 

Thank you Colleen! Yeah I don't want to add her onto the title but from talking with a mortgage broker it sounded like we could add her onto the loan in order to keep the loan a primary residence loan instead of a investment property loan for myself. I didn't know if having her on the loan could cause issues for her that we were not expecting. 

@Chad Brown   she could be a co-applicant on the loan but I am not sure that would make it her primary however he is the loan officer so he is saying that is sufficient for his bank.  You don't have to be on the title to be on the loan.      I just didn't think they would consider it a primary if you aren't on the title. It is his shop so follow his direction, is her credit going to help or hinder you?

As for it causing problems for her the loan would go against her credit so if you don't pay it her credit goes down.  If she wants to buy something else they will consider this in her debt to income ratio.