Home Loan Question
I love your news segment, as you always offer great advice and now I find myself needing some advice.
My mom is 81 yrs old and her home need needs some serious repairs, i.e. roof, porch, etc. The home is paid for however, we are considering taking out a loan to cover the needed repairs for her property. I oversee her expenses and I don’t know which type of loan to consider. She has a great credit score but limited resources as she only has social security from my dad (whom passed away four years ago). What the best course of action to take to find her some financial means for home improvement repairs over $50,000? We live in Illinois-Cook County.
Secondly another topic- my parents purchased a second house in 2019 in which I reside(I also paid the down payment)- I have a great paying job but had property I let foreclose on do to various of reasons but not financially). They allow me to stay there and I pay the mortgage ever since. My father died in 2021 (as the property is in both of their names- My Mom and Dad). The property is in Chicagoland area in a village of Illinois. My mom placed the property in my name per her death ( In her will). However, I need some advice on the best way to transfer the property to me as I have being paying the taxes, insurance, etc for the past four (+) years and plan to continue to do so for the unforeseeable future. I do not know the best way to handles such matters in ensuring that I eventually have ownership of the property. I am married with a child. My mom is it good health (thank God) but she misses my dad like crazy (55 years of marriage) and often mention not stay around long. I also have 3 other siblings who are upset that I manage my Mom’s expenses and her properties: it’s a three flat building and a single family home. I am not the oldest and despite the foreclosure very responsible in all manners. Thank you so much for your help in guiding me in these situations.
Please excuse any typo’s.
Appreciative,
Terry Says
Whew, you need an estate planning attorney right now!
I would suggest getting in contact with Kerry Peck at https://www.peckritchey.com/
If you don’t get her estate sorted out while she is competent, you are going to have a real mess on your hands. Let me try to point out a few things that should guide your thinking — but you really need to talk to an attorney.
1. If she dies owning property, the value of the property at death will get a “step-up” in basis (cost). So there will be no taxes on any gains.
2. I can see that you’d want to transfer the house into your name, but if there’s a mortgage on the property you won’t be able to transfer it until her death. And even at that point, the lender could demand repayment of any mortgage. And not sure what your credit status is and whether you could get a loan!
3. You mention several properties, so not sure which you are talking about for your own home, but assuming it is her single family home that needs repairs. Well, with no income but Social Security it will be difficult to get a home equity loan. And if she can, it will carry a high interest rate — And you’ll have to be careful that it is not “interest-only” payments with a “balloon” payment due in 5 years. And since you are not on the title — even if you had good credit — you can’t take out the home equity loan.
4. And that leads me to your original question about how to finance repairs. So let me ask you whether that must be done immediately. And how long you think she will be able to stay in the house and live alone. Maybe this is the time for her to sell and move into a senior residence.
Don’t cringe. Moving into a place that offers meals, and companionship could be a great opportunity for her– if she does it while she is still capable of making the adjustment.
Since her home is her personal residence, she can exclude $250,000 of gains from taxes, so she likely wouldn’t have a tax obligation. The buyer would discount the price — but handle the hassle of making repairs.
Yes, she will balk. But the approach to this is to go with her to visit a few senior residences near her neighborhood — or yours. Let her see what’s available, and the cost. Maybe this decision will resolve itself. The money from the sale goes into the bank!
But you still need to see a lawyer to create an estate plan — or I foresee a huge fight between you and your siblings. And even worse, a complicated forced sale of her house at the wrong time, if she needs money for her care in her old age. This will be especially difficult if she has a stroke, God forbid. You need power of attorney now, as part of this estate plan — for both financial and healthcare decisions.
I’m betting this is a lot more than you asked for! Please take my advice now.
