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Old 11-23-2009, 02:40 PM
 
3 posts, read 4,699 times
Reputation: 10

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Scenario: Retired Widow, I own my house, free & clear. I do all the yardwork (1 acre) and I do as much maintenance as I know how to do.
It is time for me to move, it is all getting to be more than I can handle and what was a joy is now an effort for me.

I want to buy a condo and rent my current home to my son & family for no more rent than the property tax & insurance. This would be way, way under the fair rent value around here. He is very reliable and very handy & will do whatever needs maintenance. I'm not sure who would pay those expenses or if we would split those things. I am also not sure if I would have imputed income or could I call the difference in rent a gift?

I could put a mortgage on this paid up home OR I could take out a mortgage on a condo for myself and leave the house alone.

I could sell this place outright & buy a condo with no mortgage. But I'd like to help my son & family if I can.

I have only been to my bank to ask about a mortgage & they do not offer flexibility just cut & dried to take a new mortgage on the condo.

Other friends have suggested that I put a mortgage on my current home because the property taxes are higher and buy the condo outright.

Some friends have said "just take a home equity loan"

Yet another acquaintance said "Just don't report the rent at all".

I sure would appreciate different views & thoughts on all of this. We built this house 40 years ago and I've never given a thought to selling or buying since then. I certainly am not savvy on all of the in's and outs and various or best options.

Yes, I have another appt. with a credit union and I am also searching for a CPA but if you care to comment, I guarantee that I will be reading with interest.

Thanks, & I sure am glad I found this forum.
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Old 11-23-2009, 02:44 PM
 
Location: Salem, OR
15,166 posts, read 37,777,141 times
Reputation: 16155
Do you have the income to qualify for a mortgage?
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Old 11-23-2009, 03:32 PM
 
3 posts, read 4,699 times
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Default What is the best way to do the money?

Oops, sorry I forgot that part. I have liquid assests to make a large down pmt (50%) and I would have to withdraw a monthly (set amt) payment from my IRA for 30 days prior to a mortgage approval. It's silly but after that, I can stop the monthly withdrawal again because I don't want to do that yet. It just has to be in force at the time of mortgage approval.

Then, I have also asked my financial people for a letter stating that I am eligible for monthly withdrawals of that amount for the next 20 years. Which I am indeed. A bank won't take that but a CU will.

I have not tapped my IRA yet but I was eligible a few years back & I will be forced to withdraw in 2½ years like it or not.

The credit union is leaning toward a mortgage or home equity loan on my current house. The bank on the other hand doesn't even see that as any kind of an asset and just wants to do a mortgage on a new condo.

Can I afford this, yes to my own amazement I can.

Will I loose money not renting for FMV, yes but on the other hand perhaps the house will go up in cost again while my son is living in it and maintaining it.

No, I cannot afford to have him pay nothing. I couldn't swing all the property taxes, insurance, and mortgage.

The question is what is my best option????

Thanks
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Old 11-23-2009, 03:50 PM
 
Location: Salem, OR
15,166 posts, read 37,777,141 times
Reputation: 16155
Honestly look at your interest rates/closing costs. You'd be looking at some type of cash out refinance, a HELOC (home equity loan), or a new mortgage on the condo. The new mortgage tends to carry the lowest interest rate, BUT if you purchase a condo that doesn't have 50% occupancy then you'd have to do the cash out refi or the HELOC potentially.

Look at what carries the lowest closing costs and interest rate and that should be your answer.
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Old 11-23-2009, 04:37 PM
 
3 posts, read 4,699 times
Reputation: 10
Default What is the best way to do the money?

But I will be in the condo 100% of the time. It will be my home.

Also the property taxes on the paid up house will be way over a thousand dollars per year than those of the condo.

Can you even get a HELOC for 30 years????
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Old 11-23-2009, 04:46 PM
 
Location: Salem, OR
15,166 posts, read 37,777,141 times
Reputation: 16155
No you can't get a HELOC for thirty years. Most are for 10, I think. I'm not sure what property taxes has to do with anything. Those stay the same regardless of where you take out your mortgage. If you put 50% down, I'd be surprised if they required you to put taxes and insurance into a payment.

I'm not sure what you are struggling with. Look at the interest rates and closing costs for a cash out refinance vs. the interest rates of a new mortgage. Whichever is lowest is in your best interest.
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Old 11-23-2009, 04:49 PM
 
Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
6,958 posts, read 21,188,381 times
Reputation: 6442
Quote:
Originally Posted by Dleen View Post
But I will be in the condo 100% of the time. It will be my home.

Also the property taxes on the paid up house will be way over a thousand dollars per year than those of the condo.

Can you even get a HELOC for 30 years????
A HELOC is a line of credit, not a fixed payment mortgage. One pays the monthly minimum payment or if there is no payment the interest gets added to the total amount outstanding.

You may (and your house may) qualify for a reverse mortgage, which is similar to a HELOC.

You may also want to place your current home in a trust and name your son as a trustee, but you would definitely want to get a qualified estate planner, advisor/attorney to set that up for you.

Good luck and good on you.
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