My MIL has lived/rented in the same house for 20 years and earlier this year the owner died from old age. Well, the property mgmt company wants to sell it and asked her if she would like to buy it for $140k. My MIL lives off her SS and her very p/t job (10-maybe 15 hours a week) so she can't afford it. My SIL recently (June) moved in because her work contract ended, and she decided she didn't want to teach English overseas anymore. She's currently unemployed but working on a certification for a job she's eyeballing. She tried to get a home loan to buy the house but of course she was denied. Now they are looking at my husband for help and he wants to help. My issue is that it would add another $500 to our mortgage payments and increase our total home loan. I told him if it was short term like a year or maybe 2 ok, but it's not. He's an amazing husband, father, brother, and son and I'm glad he's who he is BUT I don't agree with this. I think his mom needs to move into a senior citizen home and not put this kind of responsibility onto her kids because she doesn't want to move. Am I wrong for feeling like this? Has anyone refinanced their home for a parent?
I would not even attempt to do this in this financial climate. You are probably 45 to 50 yrs old. I agree, that at Moms age this gives her the opportunity to downsize. Life changes and this is a change she needs to except. When she rented, she had to be aware that the house may sell someday. I agree, if she owns it, who is going to do the upkeep?
If I were to go into this agreement it would be with eyes opened wide. If I bought the house, I would be owner, I would be on the deed with no one else. Mom would continue paying me rent to offset the cost to me. So would sister as long as she is living there. She needs to get a job. If she is a teacher, pretty sure she could substitute. I have a friend that subs almost every day somewhere in our school system. One reason I would do this is because of Medicaid. If Mom needs Medicaid at some point for her care, better a house is not in the picture. My Moms became an Albatross around my neck. Things would have been so much better if her SS had been going for her care in an AL and not into the house.
And a contract or lease (written up by a lawyer) spelling out to Mom and sister what they need to pay in rent and their responsibilities concerning upkeep. Sister is living there, she can mow the lawn. But then, I would not be buying a house for Mom.
P.S. that CPA, maybe he needs to sit down with Mom and show her how, if the house goes in her name, what she will be expected to pay now she owns a house. Rent was probably based on a mortgage based on a house bought years ago or it was paid off. Her payments may be higher and she is responsible for everything. Taxes for one. She needs to understand what she is asking of her son. What Mom wants and what she can have are two different things.
For one, the mortgage will be a investment loan.... higher down-payments.... higher interest rates. Reason the rates are higher is because investment property is a risk. Don't forget about closing costs, pro-rated taxes, other taxes, title insurance, home insurance, etc.
Second, said property would need to be declared on your income tax under Profit & Loss. No rental income to cover expenses, yet hubby is paying property taxes and other declared expenses.
Third, expenses. Does hubby have deep pocket to pay for those maintenance things that show up out of the blue? How old is the roof? If it is 25 years old, time for a new one. How old are the appliances? I had one rental property where 3 appliances all broke down in one month, I replaced them with new ones. Is the plumbing in good working order? Has the property been tested for radon? How old are the windows?
Is hubby ready for midnight panic calls that something isn't working in the house? Is he handy when it comes to fixing things? If yes, great. If not, money out of pocket.
So much to think about.
Even if he wants to buy the house as an investment, he should never borrow money to invest. That's a big no no. Would he borrow $100K and put that in stocks? Of course not. So why borrow money to invest in a house while the housing market is on its way down.
Have him call Dave Ramsey radio show and ask. Dave Ramsey is the most popular financial advisor on the radio. And he's got common sense.
Here are a few big things on the down side:
--$100,000 more in debt
--be in debt for ___more years.
--$500 more in monthly mortgage payment.
--$___ more in real estate taxes.
--$___ more in repairs and maintenance.
--What if mom and sis stop pay rent? He can't kick them out. What then? Lose more money every month.
--If you and your husband lose your jobs for whatever reason, you will risk losing both houses.
And the non money issues:
--Mom and sis calling any time, day and night, for drain clogs, roof leaks, electrical problems, etc.
--More responsibilities and headaches and less free time for your own family.
--More resentment towards mom.and sis for putting the extra burden on you and your husband.
--May ruin the relationship with mom and sis.
My personal policy: I don't do business with family and friends.That's the recipe to lose both money and relationships.
My son is currently renting from a property mgmt company with the option to buy and I can tell you they are most likely charging higher rates than a mortgage company for that house and selling at an inflated value. They're looking to dump the house because the real estate market has tanked.
And you have to refinance your house to buy another house?
What is the worst-case scenario if you don't ever get any rent out of your MIL and SIL? And the house value drops? Can you and DH withstand this extra burden and/or loss? Would it be worth it? Real estate is only a good investment if you have a good lending rate and you buy right. Maybe consider having a financial advisor give him a professional, objective answer, based on knowledge and experience, and not on emotions and feeling sorry for/pressured by his family members? His Mom is making a foolish decision to plant her flag in this house. 100% emotional decision. 0% wisdom. I'd say it's a real hard NO.
ie Would this be an INVESTMENT or a GIFT? Or is DH's aim to HELP?
IF you wanted an investment, would an investment property be your choice?
If so, is the property in question a good choice?
Would you be able to charge market rent (or close to)? Get a decent return?
If no, then refinancing to fund Mom's housing (+? SIL) would not be a solution that is financially suitable for ALL of you. It would be more like a GIFT to Mom (+? SIL).
If you can afford such a generous gift & both agree to give it - go forth & do so. With no further agenda.
However, if this is not a GIFT. Stop now & really evaluate.
There may be other ways to HELP Mom besides footing the bill. Locating specific housing advice for older women could be one.
If it would be in anyone else's name...big time NO.
If you and your husband would be the only owners. Then it could be an investment.
up eviction laws in your state because if you want her out and she won’t budge, you’ve got an expensive legal mess. If SIL isn’t living with mom, who maintains the property? You? What if you and husband divorce? Or he dies? The $100,000 is a marital debt that you, my dear, will be responsible to pay. MIL should take care of her own self. She seems to be yet another elder who didn’t plan well for her old age, and you don’t need to take on a debt on her behalf. Be firm and vote no.
This is a financial decision, and the answer lies in the details of you and your husband's financial situation. This includes your ages, salaries, assets, debt load, job security and where your kids are in terms of relying on you for support for education. It also has to do with whether buying this home is a good used of your funds as an investment; borrowing to invest CAN be a wise move for folks who are financially secure when interest rates are low.
From a caregiving perspective, how is MiL's health? Is she still COMPLETELY independent and able to manage housecleaning, snow and leaf removal (either herself or able to afford to pay to have it done)?
What home maintenance tasks were previously done by management company that will now be on her, or on your husband to perform?
Will you and husband buy the home and rent it to MiL?
Is he being guilted/manipulated into this decision? Read up on F.O.G--Fear, Obligation and Guilt.
At 74, I think moving into a senior apartment is probably a better plan. She won't be able to take care of everything it takes to take care of a house, a driveway, etc. etc. If she got into a sliding scale apartment where you pay what you can afford, she could stop working (unless she really wants to work!).