Buying House from Parent
During yet another sleepless night, my husband came up with the following idea and asked me to post it here to get opinions.
His 83 year old mother is mentally sound but financially irresponsible. He is gradually taking over her finances with her agreement. She is currently paying off two debts totaling $52,000, one is a home equity loan and one is a credit card bill. Payment on these two debts total $900 per month. After she pays these bills and her monthly expenses, she has about $450 to live on.
He will inherit her house when she dies. He came up with the idea of buying the house from her now for about $75,000, enough to pay off her debt, cover the closing costs, and set aside $12k, possibly for a car for her. He would then charge her about $400 rent to live in the house(enough to pay his mortgage on the house), leaving her with an extra $500 per month to live on.
There is a lot of wiggle room on all the numbers depending on interest rates and closing costs. The question here is more about the concept of what amounts to a within-the-family reverse mortgage.
I believe there are disadvantages to him because he would fare better in inheriting the house, but that isnÂt the issue for him right now. She is in good health, and we expect her to live into her 90Âs. The house is not in great shape, and with the current real estate market, an appraisal of $75,000 would not be out-of-line.
Neither of them want to consider a true reverse mortgage.