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?
What would happen if you or your husband were to lose your jobs or were forced to cut back drastically on your hours?
What would happen if you or your husband were to have an accident and be unable to work for 6 months or so?
You say MIL has been renting this house for 20 years. How old is the house? 20 year old house is one thing a 50 or 100 year old house is another.
What renovations will have to be made to the house in order to allow MIL to remain? Will there need to be an accessible bathroom done? Is there a first floor bedroom that she can use if she can not do stairs? (unless this is a ranch house)
How much work can you and or your husband do when the house needs repairs?
If you are living in a cold area are you ready to shovel and plow that driveway and sidewalk and do yours as well? And the lawn in the summer.
And is $149k the market rate or is there a bit of a break since she has rented for so long?
Is this an "as is" sale and no inspection? Is there work that needs to be done?
Will all repairs be done before the sale closes?
And the biggie....
Will you get your money back?
When MIL dies will the house be sold and you recoup your investment or will SIL take up permanent residence and you will be landlords for 20. 30, 40 years?
If MIL and SIL will be paying you rent at either the same rental or a bit higher this might not be a bad deal. But I would not do it unless
1. I had enough that if I was unable to work for a while I would still be able to pay the mortgage.
2. MIL and SIL sign a rental contract and they pay rent at an amount that will either pay the mortgage each month or at a rate that would be customary in the area for a house.
3. It was safe for MIL to remain there.
I am 71. My husband and I sold our home in the east and moved to the west coast about 7 years ago. We did this partly to assist my sisters care for my mother, partly to get out of the high cost of living area where we were located. We opted to put the cash from our previous home into an investment account and move into a rental property. The income from the investments more than pays for the rent. We have a beautiful place with a longish-term lease and we have no worries about the many costs of maintaining a house. We love it. I don't think that your husband's generous offer would turn out quite the way he expects. Compared to owning and caring for property, living in rentals is a simple and convenient lifestyle.
If your MIL has always rented she is not prepared to deal with the many costs of home ownership--even if she can afford them. Off-hand, I would say she probably could not. In our area a new roof starts at about $5K. If the house has not been re-roofed in the last 10 years, that will soon be due. Major appliances need replacing at regular intervals also. Then there is the painting of the exterior that needs to be done every 5 years. Yes, rent is higher than the PMI on a mortgage for the same property--but that is because the rent also takes care of all maintenance and property taxes on the property, including the headaches of getting all the bids.
Beyond all that, though, is the fact that it is your MIL's responsibility to take care of her living arrangements, not you. I would never allow my sons to make such a huge investment in my living expenses. They are 50 and need to be investing in their own futures. My husband and I feel that we have enough for a comfortable life for the 15 or 20 years that remain to us. If we do run short of money in our later years we have every intention of making do with lower cost options.
Also, bear in mind that you would probably be taking on a 30 year commitment for someone who is most likely not going to live that long. Probably before the mortgage would be half paid for your MIL will actually be better off looking at AL. Part of the reason we are renting is that we have much more flexibility in our housing that we would have if we had purchased a house. Waiting for the markets to go up or down on real estate is not a good thing to have to consider when a broken hip dictates a move to a steps-free environment! Your MIL sounds like she is really healthy now, but at our age things can change really rapidly.
Draw up a plan of how you can or cannot afford it and show it to husband.
Sometimes seeing it on paper makes it easier to accept or decline.
No, no, and no would be my advice. I don't say you don't have a good man there, because clearly you do. But I think he is misguided and I would go to counseling with him with a licensed Social Worker in private practice or a financial planner before I attempted to do this, with a whole raft full of reasons that I could go into but I would bet you already considered. Including that, should your Mom need care in future and medicaid, the claw back for care would gobble that home up in one bite.
IF you do this, insuring her home, then I think HOW you do it is worth passing past a real estate attorney.
Please proceed with caution and watch for those triangular yellow "CAUTION " signs, because I want only the best for you and your kind guy.
I’d ask DH to put emotions aside and justify it as a good business investment.
Are you giving up a low interest rate on your house to refinance a higher loan amount at a higher rate?
Since sis is unsure of her future, can mom pay the full rent and cover your costs?
How many years are you talking? How does renting from DH compare to paying for assisted living? Around here, AL is easily $60,000/yr.
If mom’s in AL and can’t pay, does Medicaid kick in? If yes to AL, but not rent, that’s money DH is leaving on the table.
It seems Mom has been consistent in paying rent but would she stop paying rent because it’s her son? Then what? Would DH evict his mom?
Would mom settle into AL better now than when health issues force it?
Is your property manager DH ready to run over every time something needs to be fixed?
Is the $140,000 a 2022 inflated bubble price and the value will go down?
What renovation does a 20 yo house? Will DH give up his weekends for home reno?
Is the property a good rental if mom needs to move?
The house would be in your name. Would that affect your ability to borrow for other purchases? Like a car?
If DH can address all these concerns, go for it.
If Mom cannot afford to buy the house and do the upkeep, then the son should not buy it for her. At 74 she needs to downsize. Its not fair that she may put her son in financial straits.
Where's your DH's thinking at?
Today, I just realised how similar (in thinking) this is to the Husbands who say "Mom is moving in".
It's their Me-Man-Fix-It for you Momma instinct that kicks in. It comes from a place of wanting to help. But it is a knee jerk reaction. A *reaction*.
But this isn't just fixing a light globe or a leaky tap..
This would be an ongoing financial burden + ongoing maintenance labour (no doubt too) - so MIL can avoid the emotional upset of downsizing & moving house.
A financial burden for you & DH. So MIL can avoid change.
This is more like setting yourselves on fire to keep MIL warm...
Friends have parents that 'rent' from them. But the property was purpose built, designed especially for aging. Financial advice was sought & the deal worked for all sides.
Downside they cannot sell without huge impacts. They are responsible now for their folks housing.
I have other friends, a little older. Unexpected retrenchment & health issues led them decide to downsize, refinance & move to a good area for an active early retirement. They sold their investment property without much ado. It did not contain their family members.
Factors to consider I suppose.
It's hard to believe that MIL can afford $1,400.00 monthly rent. That is what they would be charging if the house was worth 140k. Standard rental rates are 1% of the value.
Do you know if she has a triple net lease? This would be what you guys would do with her, it makes her responsible for ALL insurances, property taxes, maintenance and repairs.
Is her area falling apart or revitalizing? This is really important to know, because a neighborhood falling apart will devalue your house. It makes it hard to rent and it can turn into a slumlord situation.
This isn't a simple bailout, this is an investment that directly effects your investment in your house. Which, for most people, is the biggest investment they make in their lifetime.
I find it incredibly selfish of your MIL to put you guys at risk so she doesn't have to make any changes. Oh and SIL needs to get a job, any job, while she is getting her certificate. To expect her mom and brother to support her is just gross.
It will increase joint marital debt.
It will increase your joint monthly expenses.
Not an investment, but a very risky change in assets.
I agree with other's comments, do not borrow to invest.
You also need to consider how this would affect you financially in a divorce.