What is the impact on finance of cosigning a lease?

Submitted by Financial-Boot3317 t3_11dcbxm in personalfinance

Keeping it brief for now, will answer comments/questions as I can

TL;DR my sibling is trying to get an apartment for a new job. Parents are trying to cosign (since sibling income is a little less than the apartment mgmt would like), but getting the runaround in the application process since they have debt.

I got asked this morning if I would consider cosigning, but I have no idea what I would be getting into.

I trust my parents (we do have a good relationship), and my sibling would be completely on the hook for rent. Sibling has enough money for the lease as it stands, so that’s not my worry.

I know there would be a ding to credit as an applicant for this place, but I have seen enough finance horror stories to be weary of agreeing to this outright.

I appreciate any and all insight. I did ask my parents what they perceived the impact to be, and they just mentioned the credit score piece.

Worry is that in 4 mo I may be moving, so worried about how that will impact me

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BoxingRaptor t1_ja7qgy5 wrote

> and my sibling would be completely on the hook for rent.

Well, if you do this, YOU'RE on the hook for it as well. If your sibling fails to pay, the landlord will be coming to you, and could sue you to recover the back rent.

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1hotjava t1_ja7sma2 wrote

>and my sibling would be completely on the hook

That’s not how co-signing works. You both are 100% responsible for it. Meaning if sibling loses job or just doesn’t pay they come after you.

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Frozenlazer t1_ja7qahe wrote

The risk is that you are on the hook for the rent too.

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Financial-Boot3317 OP t1_ja7qtwd wrote

that I get, not as worried about that

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ScrewWorkn t1_ja7yr8g wrote

Basically treat this as if you are moving into the apartment and signing the lease by yourself. Same consequences. Shouldn't have any affect on you as long as your sibling pays and doesn't owe anything to them at the end.

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_Nuba_ t1_ja7qqzj wrote

If they don’t pay you owe the rent or your credit gets hit. Seems like it would be risky considering your parents have debt and sibling won’t make enough to comfortably cover rent.

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Financial-Boot3317 OP t1_ja7r9ks wrote

Definitely fair, I would push them to coordinate when they’ll send it each month. They have enough in savings to cover it comfortably, they just don’t look like it on paper

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Usernameforreddit246 t1_ja84b01 wrote

If you co-sign you are legally responsible for the rent, if you don’t take steps to ENSURE that the other party WILL pay (e.g., taking possession of the funds in the savings account as a guarantee for the life of the lease) you will be liable and then at their mercy in any emergency situation.

All it takes is a minor car accident they can’t afford to wipe out that savings account and now you owe the entirety of the rent just to keep your sibling from being kicked out. Your family WILL use this as leverage in that situation and “promise to pay you back” if you can even afford it, the other option is you both get sued.

Don’t consign anything you don’t have both the intention and rock solid ability to pay in full.

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No_Tension_280 t1_ja7se2n wrote

When op tries to get an apartment on his own, won't it look like he's already paying / on the hook for rent

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Financial-Boot3317 OP t1_ja7t2iz wrote

That is something I was worried about to, especially if I move in the next whatever mo

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decaturbob t1_ja7rhju wrote

  • its like if YOU signed the lease
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Crafty-Sundae6351 t1_ja801yk wrote

Exactly.

There is no such thing as a cosigner (legally). There are only signers.

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decaturbob t1_jacj8na wrote

  • the fallacy of a "co-signer" they own the outcome always
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jdiddy_ub t1_ja7wvps wrote

The simplest way of putting it is that you will be financially responsible for everything your sister is responsible for but without the benefit of actually living there.

As someone else already said, if you ever have to sign documents attesting to your financial obligations/debts, this counts.

You say you aren't worried about your sister not paying. I mean it's not a problem until it's a problem.

Many people cosign for others every day. Some people have a smooth experience and others get screwed ponying up the money for someone else.

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Engineer-Daddy t1_ja7u39p wrote

Being on the lease is a lot more than just being on hook for the rent. You are on the hook for the entire property.

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Rave-Unicorn-Votive t1_ja7tl25 wrote

>Worry is that in 4 mo I may be moving

Cosigning an apartment lease isn't quite the same as cosigning a mortgage, it won't be reported as debt on your credit report. However, if your future living situation requires you to fill out an application attesting to "having no other active leases", are you planning on lying on the application? As it's unlikely your income is enough to support two concurrent leases.

And to echo what everyone else is saying, no, your sibling will not be completely on the hook. BOTH of you are completely on the hook. If your sibling starts dating a sketchy character who then moves in and destroys the apartment, that's you paying for the repairs and being sued by management if you can't.

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Financial-Boot3317 OP t1_ja7u230 wrote

Not trying to be dumb, is that something they include in applications now? No, not trying to lie or anything, just trying to thing of all of these things before putting my name on a lease :)

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Rave-Unicorn-Votive t1_ja7v0bs wrote

I have seen language to that effect on leases. That's why guarantors usually need 5-10x income instead of 3x income for apartments, they assume you have other financial obligations related to your own housing.

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Win-With-Money t1_ja7u081 wrote

If the rental management is worried about your sibling's income and they still won't allow them to rent after your parent's offer to co-sign, it may be two problems:

  1. Too much in rent

  2. Not enough income

Perhaps you could convince your sibling to move into somewhere cheaper or at least manageable? Co-signing is a scary game even with a good relationship. In fact, it usually can ruin a good relationship.

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Financial-Boot3317 OP t1_ja7uoy5 wrote

My parents have applied and trying to cosign but are currently getting the runaround, not sure if it will be a yes or no for them :/ suspect that it’s related to student loan debt for my sibling and I and other debt idk about

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Win-With-Money t1_ja7wbtm wrote

This seems like something you should definitely pass on and maybe show some "tough love" by not co-signing. I would highly recommend to you to ask your sibling to move somewhere cheaper.

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Unfair-Example t1_ja7x15f wrote

You would be on the hook for the rent. If you also are looking for an apartment, you’ll most likely be denied.

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Biggordie t1_ja8awto wrote

You don’t seem concerned about being in the hook so I won’t regurgitate that part . But the other side of what you’re asking….If you want a loan or run a credit check, they will show that you have debt. Which means lower chance of getting a loan

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bros402 t1_ja7zpx3 wrote

You will owe the rent on the apartment if sibling cannot pay it.

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RudeAndInsensitive t1_ja81sih wrote

I'm a landlord and I have had a situation where a sister co-signed for her brother who then failed to pay so I pursued her for the financial obligations she agreed to which was the point of her co-signing...to give me an outlet in the event her brother failed to pay. That's what you're agreeing to.

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mrsmuntie t1_ja82z6i wrote

If your sibling cannot pay, YOU would be on the hook for the rent. Also this will show on your credit report.

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s4burf t1_ja8mksf wrote

And your credit looks like you borrowed the full mtg amount.

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Financial-Boot3317 OP t1_ja8sc59 wrote

Really appreciate all of the comments, thank you all!

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jcastro777 t1_jaaqdr6 wrote

You said your sibling has enough savings to cover the rent? If so, they should just offer to pay for the entire year upfront with those savings. Alternatively, if I was in your shoes I would consider co-signing under the condition the sibling gives me 1 year worth of rent, and I’d keep it in an HYSA and use it to start making payments if they stop. Once the sibling moves out you can give them back the money, and if they don’t trust you with their money then you shouldn’t trust them with your signature as a guarantor.

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Interesting-Dish8894 t1_ja923s3 wrote

You do not need to know all the negatives of co-signing because you are not going to co-sign for ANYBODY ever.

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SecretWeapon013 t1_ja94ls1 wrote

It would be good to understand when you can get out of this as well. Would the landlord require a cosigner in a year at renewal?

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