February 3rd, 2012 8:03 AM by Diego Quintero
Article first published as, Making Room for Mom & Dad, on Technorati Over the last few months, I have run into several clients in the Northeastern US who have discovered a need to manage the aging and changing mobility of their parents. This is not a coincidence anymore, but a real, actual need that many people are experiencing. It has become incredibly important to manage our immediate family and finances together, while ensuring the safety of our parents. It makes it especially difficult since the markets have plummeted and our collective portfolios are worth half of what they used to be. What advantages can be sought by this event, and how many arrows can one carry in his/her quiver to ensure that the options are the best for everyone involved? Let's take aim at being able to spend less, keep family close, and improve your overall position when it comes to your investments. The in-law suite or "casita," as they call it in the Southwestern US, has become a popular request on home searches. Being able to finance a detached structure in a new home purchase can be a challenge depending on its maintenance level, but typically it is easily included in a mortgage without any additional costs or rate increases. Are you interested in moving to accommodate everyone? Call your trusted Realtor and put together a search for a home with an in-law suite. Be prepared to look at a lot of different options and consider things like stairs, and private kitchens & baths. There is something to be said for making a fresh start so if a move is something your family could use, go for it! But, what if you are perfectly happy with your current location? Additionally, how do you position your parents in your home that may not have the required additional features? The cash required to build an addition or a detached structure could break the bank if you get carried away with upgrades and amenities. Some additional challenges include ease of access to plumbing and electricity lines,town/city permitting, easements and set backs which all come into play when planning the addition. It would be best to speak to a general contractor before venturing into it on your own. More importantly, where is the money going to come from? Here are a few choices. With rates being so inexpensive, you could refinance your own home and cash-out for "home improvements,” to include remodeling and adding the in-law suite. Putting the money back into your home is not a bad idea in this market. You may see a great return as demand for homes with this in-law feature continues to rise. If you are a naysayer and believe the market could tumble another 15-20%, then this may not be for you. At this point, however, prices are back to fair and this is the market correction that has made Real Estate, “real” again. Perhaps you have fifty to seventy-five thousand dollars in available equity to be able to make these kinds of improvements and affordability will not be an issue. This is great conversation for you and your trusted mortgage broker. Ask the questions and get the answers you need to make the best decision for your loved ones. All along consider how can you afford to build an addition to your home that enables your parents mobility, some freedom, and at the same time offering you peace of mind and...a little privacy! So, what if moving is not an option and you don't have available equity in your home...and to further your detrimental position, affordability is not in-line with getting a new mortgage? Then, consider what can be done with your parents home. They will most likely have it paid off, we hope! So there should be a viable option. A refinance using their equity, their income & their credit may help you stay on target. The cash from the equity in their home can help to make the plan come together. There are plenty of loan programs to accommodate the family on the short or long-term. Please don't misunderstand this option, if your parents are on the line for the loan, it is their responsibility to pay and keep up with the payments. But if it takes you six to eight months to complete an ideal addition to your home, you can sell your parents’ home when it’s complete. This will exonerate them from the debt, altogether, while keeping family close and safe. Ask yourself if you have hit the target on all of your options. Have you been able to afford the addition? Does it increase the value of your investment? Are your parents safe and well-taken care-of? Do you still have the privacy in your own home that you have worked so hard to get? If you are taking care of your parents, you deserve to have the ability to use their savings to accommodate them, as the major costs of assisted living options would essentially be avoided. If you have the ability to execute the plan while keeping your expenses to a minimum, you have been able to hit the bulls-eye and you still have lots of arrows in your quiver for future investment growth and your child’s education too!
Your Trusted Mortgage Broker,
Diego L Quintero