Helping your children pay off their mortgage can cause problems, and you need to consider if helping is truly in your child’s best interest.
Q: My son in-law walked away and left my daughter with no job and no money. They are not delinquent on their house payments as of now but will be next month. Their loan is with one of the huge banks.
Would it be appropriate to see if the bank would take a reduced amount to pay off the loan and I would then pay if off for them? Whom should I contact at the bank? I can’t pay the full amount they owe, but could do a lower amount.
A: Your son-in-law (soon to be former) sounds like he’s a deadbeat. If he truly is a deadbeat, your daughter will be far better off without him. But in the meantime, she is alone, without a job and with no cash or income to make her mortgage payment. It’s a recipe for disaster and she’s lucky to have a mom like you who wants to step in and help.
Although you’re willing to pay off the loan on the property (or at least negotiate some sort of pay-off), your nobility would only be rewarded with angst. First, your missing son-in-law still owns half the house. If you pay off the bank, and his name is on the title, he will still own half of a paid-off property. We don’t think you want to give him any amount for his half-interest in the home.
Next, it’s hard enough to deal with banks on normal short sales and other issues that homeowners are going through. It’s unlikely you’ll find a bank willing to work with you on the issue. The bank would rather see you help out your daughter to keep the mortgage payments current than reduce the amount owed.
If your daughter decides to sell the home and the bank loan would not be paid off in full, the sale would be a short sale and most banks require that short sale to be made to a disinterested third party – that automatically excludes selling to parents, children, siblings or other close relatives.
If your daughter’s loan was with a small bank that wanted to work with you, you might have some luck. But since the bank is one of the huge lenders, we doubt you’ll find anybody willing to listen.
If you want to keep your daughter in the property for at least the short-term, while she works out her financial situation and eventual divorce from her husband, your smartest move is simply to make the mortgage, taxes and insurance payments each month for her.
Even if you shell out $1,000 per month for a year, you’d be spending $12,000 just to see if the lender is willing to work with you. However, you might find out that the lender is not willing to work with you and will be out that money.
However, the truth is it may not be in your daughter’s best interests to keep the property if she doesn’t have a job and has no prospects for employment that will pay the bills. She might be better off moving in with you or selling the property and renting a place in order to get out from under the financial burden of the home and start her life over.
It’s unfortunate, and it may not be what she wants to do, but moving now is better than spending all of your money trying to keep her in a home that may not be affordable for her.
We know that as her mom you want to rush to the rescue and make sure she has a roof over her head. Helping her pay the mortgage and develop a plan of action to get her on her feet again is, again, probably the best thing you can do. It’s what we would do if the situation were reversed.
But you shouldn’t buy her way out of the situation just yet. Let her get divorced and then you can open your wallet generously.
Let us know what happens.