Ask Terry Questions Mother’s mortgage

Mother’s mortgage

By Terry Savage on February 22, 2020 | Wild Card

Hi Terry, I need advice regarding my mom’s mortgage payments. She is 79 y/o and retired. Her mortgage is currently $125,000 with monthly payments of about $1500/month (including property taxes) with about 12 years left. Her mortgage rate is an ARM at around 5%. What is the best way to address this going forward? She is on a fixed income receiving about $2000/month. BTW, she has about $350,000 equity on the home. I don’t think she wants to move either. Thanks for your time, I’ve been a big fan since you wrote your first book.

Terry Says

OK, I get this. It’s an emotional issue as well as a financial issue. It will be very difficult to get equity out of her house, or even for her to refinance on her fixed income.
So these two possibilities come to mind:
#1. Are you her only child? Are you able to buy her out and get a new, fixed rate mortgage that would require a lower monthly payment? If you have the income to do that, the house would be yours in the end, so your contributions to paying the mortgage would be an investment in the future value of what is essentially your home. (If you have siblings, would they agree?) You’d need a real estate attorney to do the transfer, and you must be able to qualify for a mortgage.

2. A reverse mortgage is designed to withdraw equity tax-free for seniors who plan to stay in their home. There are fees, and higher rates involved in this process — but if she lives to 100 and stays in the home (paying property taxes and insurance) she would get a monthly income for as long as she lives. But when she dies, or moves out, the entire amount comes due. She (or her heirs) can never owe more than the house is worth — but it might not leave any equity for her heirs. Because of these costs I never advise a reverse mortgage unless the senior thinks he/she will live in the home and manage the upkeep for at least 10 years.

SO, that brings us back to the REAL question: How realistic is it to think that she should stay in the house? Yes, that is a loaded question. One thing you might do is take her around to some of the nicer senior living facilities — NOT a nursing home! With all that home equity she could afford to live there for many years, along with her SS, and if she moves now, she might make some nice new friends. (We waited too long to do this for my grandmother, and it’s much harder after health starts to decline.) Maybe if she sees the alternatives, and knows she can take some of her treasured furnishings, she might be more amenable to a move. That is really the most sensible solution of all to this problem.



a personal
finance question