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Buying Your In-Laws' Home? Consider the Pitfalls Before You Do.

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Mortgage and Lending with PS Mortgage Lending 305-791-4874 or 888-845-6630 365768

Buying Your In-Laws' Home? Consider the Pitfalls Before You Do.

In an age when retirement planning continues to not be enough (because there are more factors to consider than ever before), many cash strapped retirees are looking for options to continue to supplement their long-term retirement.

In a recent article by Liz Weston in the LA Times, a reader asked if it would be a good idea for them to buy their in-laws' home and help pay the mortgage, taxes, insurance as well as maintenance for the time being and when the in-laws pass away the home is theirs to do as they wish.

Even though not the same thing, it's a different variation on helping your in-laws or parents pay their mortgage if and when they can no longer maintance the home and pay the bills.

While many heirs would consider this option first and foremost before using a reverse mortgage to pay off their parents' or in-laws' existing mortgage and putting the difference (if any) in a reserve line of credit account, it's important to, as Liz Weston states, consider the pitfalls.

One is them falling into financial hardships, like their in-laws, and being unable to make mortgage themselves thereby losing the home.

It's an important consequence to consider. Just because you have enough money now, doesn't mean that will always be the case. Taking on another mortgage, even if it's just to help, may be more costly in the future. Creditors can also use the home as leverage or payment in a lawsuit, endearing the home the in-laws' wanted to keep at any cost.

In addition, the in-laws' plan to seel the home at a below-market value could create a gift tax issue and delay their Medicaid eligibility, especially if they have nursing home or healthcare at home costs.

In the end, in trying to help the in-laws', the decision to buy their home may be more costly for both parties than previously anticipated. It's the same if the reader were to help his in-laws by paying their monthly mortgage payments, in the end, they are paying two mortgages and are no closer to paying off any of their own debts or their in-laws.

Before anything, however, the reader consulting a tax professional or lawyer who specializes in elder law and consider their options carefully.

Interested in a reverse mortgage or simply want more information? Give PS Financial Services a call at (888) 845-6630 or via email at info@PSReverseMortgage.com. We do not pressure those who inquire. We are simply here to help.

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Information and content in this blog is original to Phil Stevenson

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Phil Stevenson

PS Financial Services

Owner and Principal Mortgage Originator

Certified Reverse Mortgage Professional (CRMP)

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Copyright © 2013 by Phil Stevenson & PS Financial Services, LLC

Show All Comments Sort:
Bill Roberts
Brooks and Dunphy Real Estate - Oceanside, CA
"Baby Boomer" Retirement Planner

Phil, I like the idea of the kids buying the family home. It makes sense on many levels including saving the house for future generations.

All of her pit-falls are specious. They are only going to exercise this option if they can afford it. They are going to pay close to market value because that is what can be financed. And the house can be placed in a trust that would protect it from lawsuits against the kids.

And, if thiings really fall apart, then the parents could re-purchase the house using a reverse mortgage.

Bill Roberts

Aug 22, 2014 02:30 AM
Phil Stevenson, CRMP
PS Mortgage Lending 305-791-4874 or 888-845-6630 - Miami, FL
"Mortgage Nerd" in Miami, Florida and Texas

Bill, in some cases buying the home or paying the mortgage is beneficial. In other cases, it may not be. Most importantly, they should consult a professional who specializes in senior law before anything. 

In the end, all we can be is a guide to our clients, present or potential. We give them the tools and they decide, however, they should consider all their options and their outcome to protect, not only their family members, but themselves as well.

Aug 22, 2014 02:50 AM
Don Sabinske
Don Sabinske, Sabinske & Associates Inc. - Zimmerman, MN
Sabinske & Associates Inc.

I don't believe I have ever encountered this one, but I always advise clients to consult an attorney and/or tax professional.

Aug 22, 2014 02:57 AM
Phil Stevenson, CRMP
PS Mortgage Lending 305-791-4874 or 888-845-6630 - Miami, FL
"Mortgage Nerd" in Miami, Florida and Texas

Don, financial decisions can be hectic and stressful, they should not be made without consulting someone who can help through it. It can be a way to think through all the possibilities and different scenarios before making a concrete decision.

Aug 22, 2014 03:03 AM