Refinancing After Inheriting a Home
REM #F701
By Ilyce R. Glink
Summary: A reader has recently lost her mother after being her in-home caregiver. Now she is trying to make smart financial decisions regarding her inherited home and money. Ilyce helps the reader think through her options.
Q: I took care of an elderly parent who died recently. I lived in the home
with this parent and currently do not own a home.
The house is worth approximately $225,000, and there is a mortgage of about $142,000. I’ve continued to make the payments on the mortgage.
I actually can qualify for my own mortgage. In addition to my salary, I inherited approximately $55,000 in cash and an IRA worth $125,000. My only debt is the $8,000 I owe on my car.
Do you recommend paying off my car and paying down the mortgage so that I will only have to take out a loan for about $100,000? I would like a 15 year fixed-rate mortgage.
A: My condolences on the loss of your parent. It’s tough enough to lose
a parent, but particularly when you were the caregiver.
You have plenty of options, but you weren’t specific on what your financial
goals are other than you’re looking for a 15-year fixed-rate mortgage.
If you’re looking to improve your monthly cash flow situation, you can
take the cash and pay off your $8,000 car debt. Then, start shopping around
for a 15-year mortgage. You'll probably pay somewhere in the low 6 percent range
for one right now. If you can refinance the loan for $100,000 for 15 years at
6.25 percent, your monthly payment will be $857.42 per month.
Add property taxes and your homeowner's insurance to that and you'll get a sense
of what your monthly and annual costs will be for the home.
Should you refinance this mortgage? Probably. Unless the loan interest rate
is significantly below the market. You should also talk to an attorney to have
the title of the home transferred into your name.
NOTE: This column is distributed by Real Estate Matters Syndicate, PO Box 366, Glencoe, Illinois, 60022. This column may not be resold, reprinted, resyndicated or redistributed without written permission from the publisher.
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