[USER]

Interesting scenario for my mom and would love ideas/thoughts.

We will be taking care of my amazing mother in the future and we’re trying to figure out what makes the most sense to do in her situation right now but need help.

88k left on her home mortgage.

She pays $1126/month with a 6.78% interest meaning about $500/month goes to interest only.

She only has about $60k in liquid cash available and that’s about it.

She is 63 and cleans houses for a living (makes about $40k) and most likely can’t do this for 2-3 more years.

Thought process here is I give her $28k to pay off the mortgage meaning we would lower her housing expenses to $233/month (insurance+taces) from $1126.

This would leave her with $0 liquid but I figured if she pretends like she is still paying the full $1126 and puts it towards savings she can build back an emergency fund quickly.

If any emergencies happened we can cover them along the way.

Is this a good idea to have her pay off the mortgage completely so she can finally hit the breaks a bit and eventually retire?

Or should she leave it there as an emergency fund and Chip away slowly?

For the most part she is healthy but her arthritis is getting bad on her fingers so cleaning isn’t an option for much longer.

Thanks everyone!

[Jenny]

If she lives alone in a house, maybe she can get a roommate to lower the housing costs and have a companion ( Golden Girls style).

I would not put all of her money into the house.

She would not have any wiggle room if anything comes up.

[Miranda]

Talk to an elder law attorney in the State you live in before doing this.

[Felicia]

Just here to give you a big chest bump for considering your mother like this!

My mom is 67, still healthy overall, but since we were building a home anyways, we built her an attached casita and she moved in last year

I recognize the huge privilege it is to have a wonderfully blessed relationship with my mom to even think about doing this.

But I also recognize folks like us are in the minority in this country so it makes my heart smile when others have a heart bent towards ensuring their parents are well taken care of

My #1 advice would be, if you’re able and in a home you plan on being in for the long haul, add a granny pod to your yard and have her rent her place out/cash it out.

But I do love the idea of her lowering her expenses so she can retire in a couple years and just live off SS.

[Mihaela]

Since you are taking over her finances (I’m assuming this from your post) and paying for her when needed, it seems you’d be helping with that mortgage no matter what…

So why not cut the interest and pay it off now – just be careful because the gift limit for IRS is 18k in 2024 – but you could gift her that and your hubby or someone else in the fam do it too until you get to what’s needed.

If she kept 5k in a Hysa like Marcus Goldman Sachs savings account, she could use that for emergencies…

and not feel like she always depends on you and asks for money.

Also, if you pay off mortgage and thinking of any long term care needs of hers in the future, would it make sense for you to take the house – like put your name on title and not hers (if she needs long term care and can’t pay they can take the house after she passes) – but I don’t know about any siblings etc etc…

Also, it would be good if she could work one more year after you pay the house off – gets her closer to 65, or her social security full retirement age to maximize SS monthly earnings.

After that she could do part time work at a library maybe or things that are not so harsh on her hands…

just to earn a bit of pocket money if she wants/needs to.

[Rise]

I think it’s wonderful you’re helping your mom. I love your idea because it continues to have your mom working as long as she can, building up her emergency fund, and retaining her independence and self- respect.

The 80’s might be a time to live with you but not now.

Let her keep on the way she is, except with the mortgage paid.

She will continue to be strong but have a burden lifted and be able to enjoy some small pleasures of life with her extra time in the near future.

[Deborah]

How independently minded is your mom? There’s a chance that once her mortgage is paid, that she will want to retire then.

Wondering if it’s your desire or hers to keep working if you do this?

Saving for “savings” feels like it’s significantly less pressure than earning to pay the mortgage.

It’s a drastically different motivator.
I would make sure she’s prepared to continue working, if this is the path your decide.

[Scott]

What are her monthly expenses (excluding the mortgage) and how does that compare to Social Security (which I assume is her only income outside the cash balance she has)?

Scenario 1: If her current SS will cover her (non mortgage) expenses…pay off the mortgage, build cash reserves while she can still work.

Delay collecting SS as long as possible to maximize that income stream.
Option 2: If her SS would not cover (or barely) cover her expenses even if she waits a few more years…

she can’t afford the house and paying lots of interest is a waste.

Sell the house ASAP, downsize and the net equity plus the cash and SS can integrate into a retirement income strategy.

[Roy]

Are you an only child? Sounds like you are willing to be her emergency fund.

Contrary to what others are saying, and assuming you are able to be her emergency fund, it might be healthy to zero out by paying off the mortgage and create a sense of urgency around saving over final few working years.

[Tony]

Keep a emergency fund. Even if it costs interest. Keep paying till she can’t work.

At that time see where you’re at.

[Dustin]

She’s paying less than 6k in interest per year, I would not empty out savings for that scenario.

I think if you want to help then gift her money to throw at the principle.

[Jeremy]

First of all, good on you for being there for your mom. It speaks highly of you that you’ve led your life in such a way that you are financially positioned to do that and that you’re not only able, but willing.

Awesome.

Just my opinion, but if you’ve already got an emergency fund that will cover her if things go sideways, I think your idea is a good one.

Paying nearly 7% on that mortgage is fairly significant and it would be nice to get that knocked out, especially with her age and how close she is to retirement.

This is assuming she’s planning to stay in this home?

If she’s planning on selling and moving out, I might have a different opinion.

If she’s still able to work for another 2-3 years (and cleaning houses isn’t easy on the body) it would be fantastic if she could keep paying “the mortgage” and rebuild her savings.

It sounds like you’re planning to cover expenses that she can’t handle with her social security?

Good luck to you all!

[Jule]

Even without a mortgage, how would she sustain herself? Will SS be enough to cover all of her living expenses?

[Ed]

I would be hesitant to use the entire cash reserve for this in her situation.

Look into a family funded reverse mortgage if you can swing it.

You can get the paperwork done through a local RE attorney, and forgo all the fees associated with a conventional reverse mortgage.

I did this for my parents, and I will be reimbursed with interest when they decide to sell.

They also keep accruing equity they can use for LTC.

Note: I did have them use about 10k of their savings to pay it down to where I could pay off the loan, and it gave a sense of a stake in the process.

Now their budget is in order!

[Author]

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