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Reverse mortgage is an option for aging parent
By Edith Lank | Columnist
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Published: 9/11/2010 11:58 PM

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Q. My mother has $30,000 left to pay on her house. She is 70, and my wife and I want her to retire (her health is declining). We have about $30,000 in our savings. My idea is to pay off the house so she can spend her remaining time under much less stress. Then in the future when the house is sold, we would recover the loan (maybe plus interest), and the remainder will be distributed among my siblings and me.

The other option is to take over her payments - which means I do not zero out my savings. We have two children to care for and having no savings is not a comfortable thought.

Either way, I want to arrange something so I have ownership of the house. It is hard to explain, but my mother is always finding ways to compromise her financial state and I do not want to lose my money.

My mother and siblings are all on board with my plan. I suspect this won't be so straightforward. However, continuing to bail her out financially and spending my children's inheritance cannot continue. Is there any merit to my plans? And which plan would be sounder?

A. A good third option is available, one that won't involve your money at all. If your mother does want to retire and get rid of her mortgage payments, she can take out a government-backed reverse mortgage, receive income, and make no repayment as long as she lives in the house.

How much she could borrow depends on her age and the value of the house. I can't say how large her reverse mortgage would be, but it should be more than enough to let her pay off her present loan. Then she could receive a lump sum or monthly income, building up a gradual debt with interest. Her income or credit wouldn't matter because she wouldn't be making any monthly payments. If she lived a long time and ended up borrowing more than the house could ever be sold for, FHA insurance would cover the difference.

With this plan, you and your siblings may not have much, if anything, to inherit when your mother dies. But it can ease her finances and keep them separate from yours.

How important for house value and resale is it to redo a well-designed deck that needs to have the wood replaced?

A. That depends on the condition of the deck, price levels in your neighborhood, the size of the yard, buyer expectations for that street and similar variables. Local real estate brokers, who know your area, can give you the best advice. It doesn't cost anything to call a couple of nearby agencies and ask for opinions.

I bought a house for cash, remodeled it and now have a buyer. Everything is done (paperwork, inspections, etc.). Closing was set for two days from now. Our real estate agent now informed us the lender appraisal has not been done, possibly due to being behind or whatever the case. We asked her to contact the buyer's bank and find out what is going on, but she is remiss. She acted as it was no big deal to just extend the closing date.

We have made commitments based on the closing date and will suffer a great deal of loss - due to a simple failure of the lender to conduct the appraisal. Nobody has agreed to extend the closing date. If the contract is breeched, do we have some type of legal action for economic loss? And who is responsible for failing to meet the closing deadline?

A. I haven't seen your sales contract, so I don't know if it says time is of the essence. In many areas, it doesn't usually say that, and the closing date listed is simply a target. If it comes and goes, the contract is still in effect.

Banks are overloaded with mortgage concerns these days, and delays of the sort you mention are fairly common. If you're going to be active as a real estate trader, you'll get used to it.

As an investor, you should have your own real estate lawyer on tap, and you can certainly consult yours now. But I doubt if there's much you can do, except grin and bear it.

Am I required to have my in-ground pool up and running after the buyers made an offer?

A. Buyers are entitled to receive the property in the same condition it was when they viewed it and made their offer, unless the sales contract says something to the contrary.

• Edith Lank will respond to questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (please include a stamped return envelope), or readers may e-mail her at ehlank@aol.com.

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