The Great Grandmother

Hi Scott,

I’m in my seventies, and I’m very anxious. One of my grandchildren doesn't have enough savings to qualify for a housing loan, and is short by about $160,000. I’m prepared to use my apartment as a guarantor for that amount to enable the loan to be approved. My question is if in the future the loan is defaulted on, and my property has to be sold to pay back this money, would only the $160,000 be taken back by the bank, or would they take it all? Hoping you can help?

Joan

Hi Joan,

If things go bad, the bank won’t want your apartment, they will just want their money back. How you cough up the cash is totally up to you. You could sell your apartment, and move in with your grandchild -- for the rest of your life -- for instance.

You’re being very financially prudent asking this question. So, my advice would be not to go guarantor for your grandchild, and instead help them become financially prudent. Buy them a copy of my old book, the Barefoot Investor. It’ll teach them that they’ve got a wonderful opportunity: time. You don’t have as much of that. That’s why you shouldn’t be taking risks.

Scott