It happens to all of us. Our parents and loved ones age, and you may not have any insight into their financial situation, that is until it’s too late. So what do you do when you have to start paying their mortgage and you aren’t in a position to refinance it to qualify for a new mortgage to reduce the payment because your name is not on the lease?
I recently had a client who needed to take over her father’s house payment and ultimately other bills. She “happened” across a past due invoice from the mortgage company during a visit over the Christmas holiday. Her dad still had an interest rate of 6.875% on the mortgage and was dipping into his savings every month to make up the shortage in the mortgage payment.
What a nightmare, but she was lucky to have caught it when she did. She immediately called the mortgage company, paid the 2 back payments, and asked to be added to the account. The bank who held the mortgage (name withheld to protect the no-so-innocent) told her that they could not talk to her without written authorization. She then called her CPA to see if she could claim this “advance” to her dad on her taxes, and he told her a big fat NO.
So what did she do? She called me of course and discovered that she could refinance the mortgage into her name since she would be making the payment. We worked it out so the bank would talk to her in the future and arranged a tax write off. She did not want to get a reverse mortgage because she felt it would be too expensive.
The mortgage payment at 4.25% (as a rental property loan since she owned her own home) dropped $1000 per month allowing her to help with the other bills.
She said it was a tough conversation to have with her dad that she needed to pay his bills, but in the end this solution was the best way to ensure that he could stay in his house with $300,000 in equity and a tax benefit for her paying the payment – a win-win.
Don’t let your parents, or anyone else’s parents lose their home through forgetfulness or neglect. We have solutions.