Author Topic: Saving the family house  (Read 9979 times)

former player

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Re: Saving the family house
« Reply #50 on: January 26, 2018, 03:47:50 PM »
As others have asked, if the mortgage holder has stopped accepting payments, exactly how do you plan on paying them?

We requested a reinstatement letter from the mortgage company. They said they would only take what was owed or nothing.
So they want the whole $108k?  If you are putting in $50k, where is the rest coming from?

Sorry, my statement was confusing. They want everything that was due up to this point. It includes all the missed payments, interest, fees and lawyer fees. The reinstatement letter gives us a specific amount of time to get them the money. The lender is saying its likely to be 53-54k total.

As for if I can afford to lose this, yes I can. It is less then 1 years savings. I am as sure as I can be there are no drugs. My adult brother lives there going to college, my aunt and uncle moved in this prior year, normalish income but 4 kids between the ages of 3 and 8. Uncle also going to college and working. My sister who is a Jr in high school lives there. My parents are hard working people. Honestly they have around 30k debt excluding the house and are now up to around 80k gross income. Including the house they are 140kish in debt. A major part of the 30k is to the IRS because they cashed out a 401k for living expenses without looking into the ramifications. These are not people that live way above their means. These are people who lost income with no E fund/assets, are unorganized and were unable to cut deeply enough to keep from going into debt.

Regarding rent, they charge my uncle around 600$/month, but they often waive it for work around the house (mostly fixing up there very old falling apart vehicles.)

So.. the problem is only my dad is on the mortgage. They attempted loan modification but he no longer makes the kind of money he made when he got the mortgage. The remodification was denied. They stated they cant take my moms income into account because she is not on the mortgage.

The reason for the conditions is because I feel this is the last chance to save them from themselves. The conditions are them being active participants trying to resolve this. Living below their means. Getting organized. I dont always agree with Dave Ramsey but he has a way of getting through to people. I will hold their hand through this process. They are in their mid-40s. This is their last chance to earn back their retirement. If they choose not to then what happens 1-2 decades from now is on them.
Thanks for clarifying.  Is there a plan for making the payments on the remaining amount of the loan after you have paid the arrears?  Your parents' income of $80k needs to prioritise this, then payments on the other debts and then payments into retirement funds.  (I know others would put retirement funds as a higher priority but given your parents' recent history of head-in-the-sand debt I think that is for the future.)

I think you are doing a good thing here.  But at all costs I think you should keep your name off the mortgage, so that if things go wrong again you have at least limited your liability to the specific sum of $50k  and are not on the hook for uncontrollable amounts of future payments on a house which is far too big (housing 10 people!) and in poor repair.

Murse

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Re: Saving the family house
« Reply #51 on: January 29, 2018, 05:30:33 AM »
Question re mortgages- so I am now planning on repairing my mothers credit because my fathers is so bad. He is currently the mortgage holder and the house is in his name only.

Will my mother be able to apply for the mortgage on her own? Will he have to be included since his name is on the house? Does that mean we need to repair his credit as well?


Thanks

tomorrowsomewherenew

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Re: Saving the family house
« Reply #52 on: January 29, 2018, 06:01:11 AM »
There really is no such thing as credit repair. The only way to fix your credit is over a long period of time, with no late payments. Anyone advertising to repair credit is a scam.

ysette9

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Re: Saving the family house
« Reply #53 on: January 29, 2018, 06:20:11 AM »
Your father can repair his credit over the next 7 years by paying all of his bills on time and in full. Otherwise there is no magical free lunch as the previous poster said.

ender

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Re: Saving the family house
« Reply #54 on: January 29, 2018, 06:30:39 AM »
I'm still scratching my head because 5 adults can't come up with enough money on a monthly basis to pay on a  180K house payment.  It's got to have been 18-24 months with no payments to run up 55K in arrearages even including lawyer fees and late fees. 

Why do you think that the 5 of them will suddenly be able to afford the house payment?

+1

A 180k mortgage is roughly $1k a month (perhaps slightly more depending on taxes/insurance/interest rate). For 5 people, that's $200-250/month. Even accounting for the kids, with the uncle paying rent that means your parents only are responsible for maybe $600/month.

You've not really explained how they ended up in this situation so it's really hard to give meaningful advice on how to make it not a mess. Your parents must have been without work for multiple years?

They are currently in foreclosure. They need 50k to make catch up. they owe 108k total (including the 50k.) the house is worth 370k per zillow but lets call it 320 because the house is in rough shape.

They asked for advice because they know I am financially savvy. Their credit is shot. The mortgage company quit accepting payments. My siblings still live there, also my aunt and uncle live there. I dont know what choice I have other then front the 50k.

So lets say I front the 50k, how do I do this in a safe way? Theoretically I should be able to front the money, then co-sign for a refi, put a 120k mortgage on it, they repay me have a little for a remodel and Im now on the title for the risk I took. Any foreseeable issues? Should I speak with any professionals prior to proceeding?

You can't do this in a safe way. Your options are basically:

  • Give them 50k (or more) that you never see again
  • Cosign for a refinance that you either will pay or ruin your credit

The fact that they let it run so far behind before talking to you at all is a very bad sign for this not ending up in one of those situations.

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Re: Saving the family house
« Reply #55 on: January 29, 2018, 06:42:32 AM »
You could add your mother to the title and do a refinance in her name only IF she has good credit.  However, the income counted toward the refi will be her income only.  Before you do anything, you should talk to a couple of lenders to confirm this would be possible.

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Re: Saving the family house
« Reply #56 on: January 29, 2018, 07:45:26 AM »
Money in lent against a mortgage on the value of the house, which means that the person lending the money needs to get at least the value of their loan back in ownership of the house by the person to whom they gave the mortgage.

So: your mother will only get a mortgage if the value of her interest in the house is equal to or exceeds the amount of the mortgage that will be in her name.

I think you will need to have a lawyer change the deeds to the house so that your mother owns at least as much as the amount of mortgage she will be taking out.

As long as your mother owns enough of the house, and the mortgage company is sure that they will be able to force the sale of that share in order to get their money back, it seems to me that your father's share and his financial status probably doesn't matter (although that does change if your father is likely to be forced into bankruptcy).

But I agree that this all needs to be clarified through a lawyer who is acting for your mother and through enquiries of mortgage companies.

Sibley

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Re: Saving the family house
« Reply #57 on: January 29, 2018, 09:36:24 AM »
RE credit "repair" - if there are errors on the credit report, once they are corrected then the score will adjust based on the correct information. Everything else would have to age off, or build up based on reported activities. The "credit repair" places are scams charging you to fill out some forms and provide information to get wrong information removed or updated. Which you can do yourself.

OP, this is not going to end well. Your lack of understanding of how credit works (easily google-able!) is frightening given what you're trying to do.

Murse

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Re: Saving the family house
« Reply #58 on: January 29, 2018, 03:12:30 PM »
RE credit "repair" - if there are errors on the credit report, once they are corrected then the score will adjust based on the correct information. Everything else would have to age off, or build up based on reported activities. The "credit repair" places are scams charging you to fill out some forms and provide information to get wrong information removed or updated. Which you can do yourself.

OP, this is not going to end well. Your lack of understanding of how credit works (easily google-able!) is frightening given what you're trying to do.

There are many assumptions being made by many posters. I said I am planning on repairing my mothers credit. It is being assumed that I meant I was hiring some kind of service, I am not.

I understand credit and I understand how it works. I however am not very familiar with mortgages (I have never had one.) I will do everything possible to increase my mother credit score.

Back to my question that another reader answered- how can We get her added to the title?

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Re: Saving the family house
« Reply #59 on: January 29, 2018, 03:45:45 PM »
You want to talk to lenders FIRST.  They will tell you if this is feasible and how to add her on title in your state to accomplish this.  Often couples will buy a house but only one is on the loan because of credit issues with the other spouse.  Ask a reputable agent for a referral to an experienced mortgage broker.

Murse

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Re: Saving the family house
« Reply #60 on: January 29, 2018, 03:54:38 PM »
You want to talk to lenders FIRST.  They will tell you if this is feasible and how to add her on title in your state to accomplish this.  Often couples will buy a house but only one is on the loan because of credit issues with the other spouse.  Ask a reputable agent for a referral to an experienced mortgage broker.

I am just clarifying, we need to speak with their current lenders? Or speak to a new lender?

This is what happened in their case, they left my mother off because of bad credit. I am trying to find out how/if we can get her on the title, and leave him off the refinance. With this near foreclosure issue I imagine it will take years to get his score up significantly.
« Last Edit: January 29, 2018, 04:00:58 PM by Murse »

GizmoTX

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Re: Saving the family house
« Reply #61 on: January 29, 2018, 04:02:35 PM »
It sounds like neither parent has good credit. Why do you think a refinance is even possible? Why would any bank want to?
OP, you are not a banker, which is why you are being dragged into this. Let it go.

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Re: Saving the family house
« Reply #62 on: January 29, 2018, 06:26:41 PM »
You have to pay the arrears and get this up to date immediately.  Once the loan is in good standing, talk to several mortgage brokers (not directly to banks) about your mother's credit situation.  Don't use the internet, get references for brokers that can deal with messy situations without taking advantage of the borrowers.  Too many shady people in the mortgage business not to get references.  The mortgage brokers will give you varying ideas of what can be done and how long it will take. In the meantime, the current loan will have to be paid on time, every month.

If you can't get the loan refinanced, your parents will have to make the current monthly payments for years to come.  If this is not possible for them, once the loan is current, the only reasonable choice is to sell the house and rent.  They can pay off their other debts with the net equity, maybe put some money in savings, and start fresh.

Murse

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Re: Saving the family house
« Reply #63 on: January 29, 2018, 07:12:39 PM »
You have to pay the arrears and get this up to date immediately.  Once the loan is in good standing, talk to several mortgage brokers (not directly to banks) about your mother's credit situation.  Don't use the internet, get references for brokers that can deal with messy situations without taking advantage of the borrowers.  Too many shady people in the mortgage business not to get references.  The mortgage brokers will give you varying ideas of what can be done and how long it will take. In the meantime, the current loan will have to be paid on time, every month.

If you can't get the loan refinanced, your parents will have to make the current monthly payments for years to come.  If this is not possible for them, once the loan is current, the only reasonable choice is to sell the house and rent.  They can pay off their other debts with the net equity, maybe put some money in savings, and start fresh.

Thanks for your help and understanding. The arrears are getting paid next Monday. She currently has a credit score around 580-600 with 4 accounts in collections. I have added her as an authorized user on 2 of my accounts and currently researching what to do about the accounts in collections. Any ideas?

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Re: Saving the family house
« Reply #64 on: January 29, 2018, 07:35:42 PM »
How old are the collections?  If they are old and collection efforts have ceased, it may be best to let them drop off the credit report.  If they are newer, it may be better to pay them.  That's a general rule of thumb, not specific advice for your mother's situation. 

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Re: Saving the family house
« Reply #65 on: February 13, 2018, 09:29:48 AM »

It does not appear they qualify for the harp program. They do not meet You are current on your mortgage, with no 30-day+ late payments in the last six months and no more than one in the past 12 months. Thanks for your input though.

My Mom also was in foreclosure and called for help. She owed 95k on a 120k house, because my folks used the HELOC as a credit card. She had not paid the bank for over a year, and they wanted an immediate 20k or 30k. She qualified for HARP or a similar refinance plan. Check in with the county level Office on Aging. You should be able to find an advocate. I did.

Murse

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Re: Saving the family house
« Reply #66 on: February 13, 2018, 07:37:24 PM »

It does not appear they qualify for the harp program. They do not meet You are current on your mortgage, with no 30-day+ late payments in the last six months and no more than one in the past 12 months. Thanks for your input though.

My Mom also was in foreclosure and called for help. She owed 95k on a 120k house, because my folks used the HELOC as a credit card. She had not paid the bank for over a year, and they wanted an immediate 20k or 30k. She qualified for HARP or a similar refinance plan. Check in with the county level Office on Aging. You should be able to find an advocate. I did.

What do you mean the county level office on aging?

FINate

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Re: Saving the family house
« Reply #67 on: February 13, 2018, 11:10:25 PM »
If you proceed with this (which it looks like you will), then you may as well kiss the $50k goodbye, the full $108k if you co-sign for a refi. Setting aside all concerns about their money management skills, if the number of adults living there couldn't get the money together for the mortgage payment then you're never getting your money back, regardless of reasons for original nonpayment. If you're ok with losing the money, and potentially having to bail them out again later on, that's fine I guess. But I've seen many relationships ruined by this type of thing, where the person making the loan is angry and frustrated, and the family member in debt is full of shame and guilt...it can literally tear a family apart.

Moreover, the entire premise is off. If you want to help your parents through a tough time there is nothing sacred about the house. Your goal should be do to it in the most efficient and sustainable way possible. Let them lose the house, which is apparently too big for them anyway. Then put only your parents (rather than all the other able bodied relatives) up in an affordable apartment for a short time while they get their finances in order. 

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Re: Saving the family house
« Reply #68 on: February 13, 2018, 11:52:45 PM »
Murse,

Some of the responses have been a bit harsh. IMO.

It sounds like your parents had a temporary (up to 5 year temporary) no income situation, they ignored so many important things, but now could move forward with $80k/yr income and only $1k/mo mortgage payment.  As other notes, between mom, brother, uncle and aunt, there are at least FOUR adults capable of helping to pay the mortgage now.. even with part time jobs this is possible.

Therefore, if you can help them with good budgeting sense, I don't see why you would not be repaid for the $50k eventually.

Agree strongly with the following points:
a) Talk to a real estate lawyer about it and the foreclosure
b) don't co sign.

My initial thought was for you to buy the home, take the title to it (or another smaller place), but if your parent's situation truly is "temporary" and now resolved, it may be worth the risk and reduced hassle to gift or loan the $50k in return for a second position on the property to secure it. (See lawyer).
-----------------

A key issue that has not been addressed well yet --  your uncle only paying a low rent of $600/mo, and then only paying it from time to time.

Your parents do not have the $'s to pay someone to fix up old vehicles for them, they need the rent in cash.  (because they are about to lose their home over it!)

Also, your uncle should be paying closer to $800 per month  (assuming the whole home would rent for $1600, his share for his family would be half, 6 bodies use up a lot of home, the only exception is if they just rent a tiny basement suite separate from the main kitchen and living areas),

 PLUS he should be paying his family's share of the increase in utility costs.   A whole family and little kids use a LOT of utilities, by the way.

It is very likely that right now your parents are actually spending each month to support your uncle's family to stay with them -- paying extra CASH on utilities, maybe food? while waiving any rent because of the car fix ups.


Good luck.  As long as you don't co-sign anything, it sounds like your personal risk is limited to 8 months worth of savings.

elaine amj

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Re: Saving the family house
« Reply #69 on: February 21, 2018, 09:22:46 AM »
Been thinking about you. How are things going with your parents?

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Murse

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Re: Saving the family house
« Reply #70 on: February 21, 2018, 01:16:28 PM »
Been thinking about you. How are things going with your parents?

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Thanks for asking, things have been going well so far. We started the Dave ramsey program, I go over each weekend, we work on their budget and their plan. We are almost through the entire first month.

After adding my mom to one of my credit cards her credit score jumped 70 points (per credit karma.) I have since added her to a second and am waiting for it it be reported to see if we can get her to the 700$ range.

There have been a couple disagreements over some petty stuff (pocket money) but it is all getting worked out. We will make all minimum payments this month and also pay off their smallest balance (150$.) I expect to make more progress in future months because they had some expenses this month that will not be ongoing.

Current plan is as it was before, increase the credit scores as much as possible and refi, or sell if I can talk them into it.

Question for the wise ones- they have about 3000$ in collections, would paying this off help my mothers credit score?

ysette9

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Re: Saving the family house
« Reply #71 on: February 21, 2018, 02:16:54 PM »
When you say “they”, does that mean the debt in collections is in both of their names?
Thanks for the update. Nice to hear about the progress so far. I hope they can stick with it.

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Re: Saving the family house
« Reply #72 on: February 21, 2018, 03:10:44 PM »
I think OP mentioned collections in his mother's name.  If they are fresh, it's better to work out payment.  If they are old and will drop off her credit report before the refinance, it's probably better to let them do that.

robartsd

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Re: Saving the family house
« Reply #73 on: February 22, 2018, 09:16:10 AM »
If they are old and will drop off her credit report before the refinance, it's probably better to let them do that.
Does anyone know what qualifies as "old"? I imagine they don't drop off until at least 7 years after default (possibly as long as 7 years after being written off as a loss).

Getting a new payment plan and paying accordingly should help credit score over time (even before complete payoff).

Murse

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Re: Saving the family house
« Reply #74 on: March 07, 2018, 09:04:27 AM »
Update time/question for the masses-
We have made some good progress, there cash flow is getting more flexible by the week. There are a couple things I will be addressing with them- pocket money is high, allowance for teenage daughter ect...

They are only putting around 800$/month towards debt. I would like to see this higher.

We have decided to pay off the highest interest rates first.

They have 2 personal loans (highest interest rates)
One for 3300 at 26% 177 payment
One for 1600 at 22% 152 payment



My original thought was to take a loan myself for 5k and have them make the payments. My wife is uncomfortable with this so she will not be proceeding.

I am looking for ideas. Current household gross income is around 70-80k. Current debt is around 90k mortgage + 30k in non-mortgage debt including 10k to the IRS (not sure if that matters.) My mother has the higher income, her credit is now in the 670s and she has 4 items in collections (around 4K total.)

We have already looked into a retirement plan loan, it wont work due to a 1year waiting period between these loans.

How should we proceed?

FINate

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Re: Saving the family house
« Reply #75 on: March 07, 2018, 09:45:14 AM »
Thanks for the update, glad to hear they are making progress.

All freed-up cash flow must go to paying down the high interest debts. Oh, and good on your wife for squashing the 5k loan idea. Multiple loans, previous retirement plan loans, pocket money, allowance for teenage daughter - these are all symptoms of folks who struggle with spending money as soon as it's in hand and/or the mindset that it's ok to spend as long as you can keep taking new loans, rolling things over, etc. Unless they get this under control they will never be financially healthy.

IMO the allowance should be cut off, full stop. Teens don't need an allowance because anything they need (and I mean a real need, not a want) is purchased by the parent. If she wants spending money she can get a job.

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Re: Saving the family house
« Reply #76 on: March 07, 2018, 10:07:53 AM »
Your first post said that there was $108k owed on the mortgage, of which $50k was arrears.  Now you say there is $90k owed on the mortgage.  What has happened to the foreclosure proceedings and to your proposed $50k gift/loan?

What makes up the $30k non-mortgage debt?  You have only mentioned $10k to the IRS and $4.9k in two personal loans, so there is another $15k somewhere?

If you are setting out a list of the household debts, don't forget to include the amount you have loaned them against the foreclosure.

How much are each of the adults still living in the home contributing?  Is your uncle paying his $600 monthly rent in full and on time?  Are your siblings contributing anything?

I'm not sure how much leverage you have over the situation.  I would suggest: you need a simple sheet of paper setting out all the outstanding debts with interest rates and minimum payments. Set out how long it will take to be clear of debt at the current rate of payments and how much will be paid in interest.  Then set out how increasing payments reduces the time to being debt free and the amount of interest paid.

Yes to paying off highest interest debts first.  But use the info above to make sure that 1) the highest interest debts are paid off as quickly as possible and 2) the payments on those debts are rolled over into payments on the next highest debts rather than allowed to go to lifestyle increases.  Use the impossibility of lifestyle increases until all debts are paid as an incentive.

It does sound as though you are bringing some order into the chaos, so well done so far.

Murse

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Re: Saving the family house
« Reply #77 on: March 07, 2018, 10:22:14 AM »
Your first post said that there was $108k owed on the mortgage, of which $50k was arrears.  Now you say there is $90k owed on the mortgage.  What has happened to the foreclosure proceedings and to your proposed $50k gift/loan?

What makes up the $30k non-mortgage debt?  You have only mentioned $10k to the IRS and $4.9k in two personal loans, so there is another $15k somewhere?

If you are setting out a list of the household debts, don't forget to include the amount you have loaned them against the foreclosure.

How much are each of the adults still living in the home contributing?  Is your uncle paying his $600 monthly rent in full and on time?  Are your siblings contributing anything?

I'm not sure how much leverage you have over the situation.  I would suggest: you need a simple sheet of paper setting out all the outstanding debts with interest rates and minimum payments. Set out how long it will take to be clear of debt at the current rate of payments and how much will be paid in interest.  Then set out how increasing payments reduces the time to being debt free and the amount of interest paid.

Yes to paying off highest interest debts first.  But use the info above to make sure that 1) the highest interest debts are paid off as quickly as possible and 2) the payments on those debts are rolled over into payments on the next highest debts rather than allowed to go to lifestyle increases.  Use the impossibility of lifestyle increases until all debts are paid as an incentive.


It does sound as though you are bringing some order into the chaos, so well done so far.

To answer your questions we paid the arrears and the loan balance went to 93kish.

It had a loan balance of 108k at the beginning. I assumed all of the 53k would go toward principle. I am not certain but I believe much of it went to fees, back property taxes, and back insurance. It was surprising to us as well.

I will answer the rest of the questions tomorrow AM.

Sibley

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Re: Saving the family house
« Reply #78 on: March 07, 2018, 10:47:48 AM »
<snip>
I assumed all of the 53k would go toward principle. I am not certain but I believe much of it went to fees, back property taxes, and back insurance. It was surprising to us as well.

I will answer the rest of the questions tomorrow AM.

Typically, interest, late fees, property taxes, and insurance will always be paid before principle. Exact order probably varies. Interest - b/c the company wants to make money. Late fees - same. Taxes - otherwise the property may be seized. Insurance - otherwise the property may suffer loss of value and not corrected (storm damage, fire, etc). Principle is only reduced after everything else is fully satisfied.

elaine amj

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Re: Saving the family house
« Reply #79 on: March 08, 2018, 07:08:10 AM »



To answer your questions we paid the arrears and the loan balance went to 93kish.

It had a loan balance of 108k at the beginning. I assumed all of the 53k would go toward principle. I am not certain but I believe much of it went to fees, back property taxes, and back insurance. It was surprising to us as well.

I will answer the rest of the questions tomorrow AM.

Ugh. That stinks. And in hindsight, I wish you had found this out when you were trying to decide what to do so you could have made a fully informed decision.

Hang in there! I do applaud you for being there for your family when they need you.

There's been a couple of other threads in the forum I have been following of other MMMers doing something similar and eventually making some great progress. It's been pretty inspirational how they have managed to turn their families' perspectives and actions around. It's not an easy road and I'm sure there will be bumps ahead. I also know u will get a ton of great advice here. Biggest thing is to make sure that whatever help you give them is sustainable and will really help them in the long run.

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Murse

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Re: Saving the family house
« Reply #80 on: April 28, 2018, 07:29:02 AM »
Time for an update-

Through internet research I have found we will be unable to refi until at least a year since the last late payment. So likely Feb of 2019ish.

How is it going?
My parents are watching the Dave Ramsey videos, they have ceased taking out new loans, I truly believe my mothers way of thinking of payments vs total cost has changed. However, my parents are not paying anything extra on their debt thus far (excluding 100$ish in the first month.)They are making all the minimums, maintaining their emergency fund of $1000, but basically servicing the debt until it expires through payments. No new loans have been taken since we started. My mother has even been allowed to pull some OT recently so hopefully that will be thrown toward debt.

Our plan moving forward- their credit scores are much higher since adding them as authorized users on my credit cards, the plan is for them to take out a new 5k loan (without collateral) to pay off two personal loan they have each at >24% interest. They will then sell their Jeep (their idea, will likely get 6-7k out of it) that was used as collateral for one of the personal loan and pay off debt with it. Possibly buy a beater as well but that has not yet been decided.

Upcoming challenges- my uncle plans on moving out, that will be 600$/month in rental income my parents will lose out on. I would guesstimate the net loss will be closer to 400$/month when considering the increased costs associated with his 6 person family. May is where most of the birthdays in my family occurs, so their will be costs. We will keep trucking along.

Playing with Fire UK

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Re: Saving the family house
« Reply #81 on: April 29, 2018, 02:32:14 AM »
Thanks for the update Murse!

I found it useful to explain how much better value it is to put spare cash towards debt rather than spending. For example, if you have $100 in your hand, and you put it towards the 24% debt, on the day in (say) five years time that you would make the final payment you'd have to pay $100*(1.24^5) = ~$293. There is an MMM article that explains it better than me.

Would they be open to having another lodger join them at market rates after uncle moves out?