AI Legalese Decoder: A Game-Changer in Debating ‘Should my Parents Pay my Entire Mortgage?’
- August 29, 2023
- Posted by: legaleseblogger
- Category: Related News
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Analysis of Mortgage Payoff Option at Retirement Age and AI Legalese Decoder Assistance
Introduction
Hello team, I hope this is the appropriate platform to seek guidance on a matter that concerns my parents and me. I am a 30-year-old woman, an only child, and I consider myself extremely fortunate to have the most amazing parents. They have worked diligently throughout their lives and have exhibited excellent financial management skills. While they may not be considered extremely wealthy, they lead a comfortable lifestyle and avoid unnecessary extravagance. I would like to acknowledge that seeking advice in my privileged position is something I deeply appreciate and do not take for granted.
Current Situation
My father, who is currently 65, has expressed an interest in paying off the remaining balance of my mortgage. The outstanding loan amounts to approximately $315,000. His rationale behind this decision is that by paying it off in full now, we can eliminate the years of interest payments at an average rate of 6%. This, in turn, would save me significant amounts in the long run, which I could allocate towards other long-term investments. By making this generous offer, my parents aim to provide financial support while they are still alive, given recent losses in our extended family. I must admit, contemplating their inevitable passing is a difficult topic to handle. However, they believe in reaping the benefits of their assistance now, rather than waiting for the uncertain future where their financial contributions may not hold the same value. It truly emphasizes how incredible they are, and I genuinely feel blessed to have them.
Considering Their Retirement Age
As we embark on this discussion, I find it crucial to evaluate whether this mortgage payoff option is beneficial for my parents, considering their retirement age. It is essential to ensure that the decision they make aligns with their overall well-being both now and in the future.
Potential Benefits and Ownership Arrangement
It is worth mentioning that if my parents proceed with paying off the mortgage, they would likely become partial owners of the house alongside me. This arrangement would necessitate further deliberation, as it could have implications for all parties involved.
My Financial Standing and Their Current Situation
To provide a comprehensive picture, let me outline some additional details: my current salary amounts to $100,000 per year, and I have a penchant for saving. On the other hand, my parents’ combined savings amounts to $300,000, and they continue to enjoy working without any debt.
Role of AI Legalese Decoder
In this complex situation, where financial considerations and familial dynamics intertwine, seeking professional advice is crucial. This is where the AI Legalese Decoder can significantly assist us. By employing this cutting-edge technology, we can decode complex legal jargon, ensuring a clear understanding of the intricacies involved in various legal agreements. This AI-powered tool can help us navigate the potential intricacies of the ownership arrangement, assessing its implications for all parties involved.
Seeking Advice and Thoughts
Considering the details outlined above, I humbly request your advice and thoughts on this matter. Any valuable insights and recommendations regarding the mortgage payoff option, the partial ownership arrangement, or even the broader financial implications for my parents at their retirement age would be greatly appreciated. Thank you all for your help and support!
Warm regards,
[Your Name]
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Parents tend to do ‘less than sensible’ things for their kids all the time.
I’m guessing they would rather see you be a little more free while they are around.
I would:
a) let them, and say a very big thank you, and
b) get some legal protection in place that protects their gift from any of your future partners & get some advice on protection so in the event of needing a rest home, there isn’t a claw back on your property.
Depends on their financial circumstances.
If they have cash assets of a few million dollars, no problem.
If they have cash assets of 315 thousand dollars, big problem.
Nothing wrong with an “early inheritance”, indeed a lot right with it, just as long as it is economically viable.
Have you considered fully offsetting your mortgage? This will mean you pay zero interest.
My parents recently got access to their retirement funds and offered to pay our mortgage in full. Instead we opted for them to help us by using their funds to offset our mortgage.
Kiwibank allows our mortgage to be offset by up to 8 bank accounts. These can be a mix of your accounts, your parents accounts and your children accounts.
Our mortgage is 100% offset. We don’t pay any interest and should pay off our mortgage within 11 more years (instead of 27 years). This means parents money will be helping us for about 10 more years since we have some savings that will offset the last year or so.
The beauty of this is that parent’s money is 100% accessible to them and in their name. We do not have any access to it. Just make sure you advise them of the amount needed to offset your mortgage each month so they don’t leave any extra money on the table and can move their excess money somewhere to gain interest.
Yep. Pay it off.
I’m going to be doing exactly the same with my daughter. I’m actually buying her the house.
The money is of no use to us, and it’ll make all the difference to her. She’s a sensible and mature young woman and we don’t mind helping her at all. It’s her understanding that she’s incredibly fortunate and she have a responsibility to reciprocate back to the world all she’s been given. Riches in the world but poverty of the soul is a horrible affliction I pray she never suffers. And she’s not been set that example, so we’re not too worried.
We see money the same as a garage of tools. No good just sitting there unless it’s being used. We certainly aren’t interested in actively accumulating more, just to horde away and watch our offspring struggle.
IÔÇÖm jealous AF.
Let them do it – and be the best daughter you can be
IÔÇÖm thinking of giving my kids an interest-free loan. That way they avoid paying the bank interest, we get retirement cashflow from the principal payments and nobody feels like they got handed something on a plate.
Only thing to watch out for is relationships.
I’d say put the house into a trust and make yourself and parents the trustees.
Then if you ever do get into a relationship get them to sign a prenup/contract out agreement.
>is that a good option from their point of view being retirement age?
I don’t see the relevance of this. I’m assuming if they are starving you’d feed them? Unless you are going to cut them off completely after receiving payment I don’t see that being a problem.
If you want, you can use that free time/money you get from your parents taking that burden off you to spend quality time with them.
Times fly, they’re 65 now, but will be 75 in a blink. You have an opportunity to use your energy to focus on your family instead of working for the bank.
It takes alot of grace to give love, and it takes abit more to receive love. This is an act of love from your parents, be gracious in accepting this gift. Give back by spending more time with them.
Take care with part ownership as your parents can be caught by the Brightline test.
Good option is, as mentioned, is the interest offset. Leaves the cash in their hands on case they require it.
Look at asset protection for yourself, e.g. a trust
If they’re doing it to be part owners in your house. You might save on interest but lose out on capital gains right? So you’re parents might actually cost you money by trying to help you in the long run.
Will they go on the title?
If so how long will you own it?
Bright line on whatever their portion is, as it isn’t their own home…
ALSO, make sure they have a trust set up by an estate planning lawyer who ONLY does estate planning, etc so it’s all easier for you when that time comes. It will lower your tax burden and preserve their assets for you as they age. Also, if they start to get weak or not sure on their feet or even now if they are fine – have them see a good PT to figure out how they need to build their strength.
My only advice is that they talk to a lawyer and make sure they give the money in a way that doesnÔÇÖt disadvantage their access to cash later should they need Rest Home care. I think the current look back on gifted money is 10 years.
Have a talk with then about your concerns and ask what their expectations are?
Are they expecting you to look after them in their retirement. But to me it sounds like they will be self sufficient
I would think of it as a living inheritance. And the benifits now if you use it wisely will be far greater to you and your family. It is logical if your dad saves and doesn’t really spend it as mortage interest rate is higher than savings in his account.
Pay it off. Invest or whar ever with your extra cashflow.
Also you might want to talk to an accountant / lawyer as gift tax will probably come into play. And it could have other implications depending on the arrangement. (part owners of the house)
Another option could be for them to lock that cash into a joint account with you and your mortage be offset against that.
This keeps your house seperate from the parents.
And if all parties are needed to sign to move the money they cant pull it out from under you without warning.
And wills should be updated for your situation too.
Let them, 6% is too much. Remember all they need is support when they’re old, not hundreds of k to sit on.
Here’s another option.
They clearly have enough savings to help you pay it off. So why not get them to let you offset your mortgage against that amount. You pay your mortgage per usual, but now you are not being charged interest. In the mean time, pay you parents the interest you would otherwise be paying.
In this way, you are technically saving money.
You are paying them money but as you said you’ll get it all back one day anyway. It’s a nice way to say thanks and better them than the bank.
They also earn interest in their retirement.
So from my perspective there is no right answer. I am in a similar position to you. Dad passed away a couple of years ago and mum got a reasonable life insurance payout. Also her father passed away not too soon after. They also had a couple of rental properties and mum sold the family home and purchased one of similar value.
She offered to pay my mortgage and that of my brothers and we are paying her back (interest free) at $500 a fortnight. Her reasoning was that she is relatively comfortable and did not want the continued responsibility of the rentals. It has helped our lives significantly as we have more disposable income to help with our children (weÔÇÖre not going crazy with holidays or anything like that) and she has the knowledge that she is getting a regular payment from us. We drew up an informal agreement that if either of us separate from our wives and sell the house that she is paid back in full from those proceeds.
ItÔÇÖs something I would encourage you to consider and have a pretty frank discussion with them. From your post it doesnÔÇÖt sound like youÔÇÖre partnered or have kids. However something to consider would be relationship property if that does change. So am agreement with them that you owe them $X dollars that can be recalled at any stage.
Best of luck with your decision.
I wouldnÔÇÖt have them on the title at all. If/when they need rest home care, the govt can claim back money in investments or gifts going back 7 years (or at least I think this is true, best to talk to someone trained in all this). So from my understanding, if they are on the title, even if the reason is only a small portion, you can be forced to sell your home, or pay their rest home bill. Those things are friggin expensive and are designed to bleed you dry of money, and only once you have a few dollars left to your name, will the govt subsidies it. You may think that miles down the road, but how old will they be in 7, 10, 15 years? What health do other people enjoy at that age? You would need 7years clear of when they are off your title, for your home and assets to be safe.
Someone mentioned an offset mortgage, with their contribution sitting there. That might be the safest way if the intention is for you to pay it back. If it is a no strings attached gift, then do it sooner rather than later and donÔÇÖt ÔÇ£spendÔÇØ that money till after 7 years (ie make sure you can draw back on the mortgage by that amount). Then open an investment account and channel your monthly payments into there.
Parents redistributing the wealth now is a great thing to do.
At your age your parents generation held over 20% of all wealth. Your generation holds 4%
Parents like yours are doing the right thing to correct the imbalance of wealth across generations
Do they want to adopt a 38yo male? I have less owing om my mortgage if that helps
take the deal, take it, do it. repay it in love
Let them do it and put the money you’re saving towards a rental property to make some money.
Rather than having them pay it, two ideas you might think about are:
Selling them the house and paying them rent. They get a regular weekly income they can spend, and you get to know your money is going to someone you care about rather than your bank. You would presumably get the house back in their will.
Having them offset the mortgage using their savings. Their money stays in their account. You keep the house and will repay the mortgage at turbo speed now you’re no longer paying interest.
Your parents sound awesome and have obviously instilled you with a pretty good sense too. Kudos to you all and while you’re in a more fortunate position than most, that’s not something to feel guilty for. (Just saying)
So, I think if your folks are in a position to do this, 100% it will relieve you of a huge amount of future interest and debt. The alternative, if you’re comfortable covering your mortgage might be to double down on an investment property. But you could equally take a healthy portion of the money you save an invest every week, save some and with a bit left over, actually take time to enjoy life more often with your folks as a thank you. Life is too short, quality time with your loved ones is an investment you never regret. (Father of a single child, it would fill my heart with pride and joy to do just this for my son when I can.)
Wow, what an amazing gift. I would take this in a heartbeat if I was in your position, as long as it didnÔÇÖt send my parents to the poorhouse (which doesnÔÇÖt sound like it would). I hate my mortgage with a passion and am counting down the years till itÔÇÖs gone LOL
Let them 🙂 save the money you would put on your mortgage and use it to visit them or travel with them or just spend time with them.
I am a 31F an only child to parents who are mortgage free (also privileged). We are doing a similar thing – parents paying for half and owning half (an investment in ways for them) and IÔÇÖm loaning the other half, paying the mortgage then. Perhaps you could consider this? That way they get to make a good investment and help you out. I know eventually that it would be mine but itÔÇÖs nice for both parties.
Offset mortgage it, that way you still save the interest and the 300k is still there if your parents need it back.
If you wanted you could work out the interest portion youÔÇÖre saving and pay it to them instead so they are getting a return although given it would be around 15k a year it gets murky tax wise.
IÔÇÖm not sure about the NZ law but I know in Australia itÔÇÖs common for parents to do this as gifts pre death because post death there can be more adverse tax treatment. Your parents may have figured this out.
Get lawyers involved – one for them, one for you.
You need a contract in place, including whether money is a gift or a loan, who owns what, and any expectations if they want the money back.
I strongly recommend that you do not add them to the house title. Do not make them part owners.
Your parents sound great but you need to protect yourself and your home. No matter their good intentions. A lawyer will help with this – but in case you’ve used the “family lawyer” before, you need to have a different person who will put your best interests first.
Yes take the offer even if they are part owners. I would save what I would have spent in that mortgage money over a 12 month period and shout a family holiday overseas somewhere special for the three of you to create life long memories and spend quality time, that means more than any asset.
Honestly I wouldnÔÇÖt take them up on the offer. They are doing it to be part owners, so it makes it a bit messy. Can they structure it as an interest free ÔÇ£loanÔÇØ. If the point is to help you, then a gift or preferably an interest free loan is the way to go and will benefit you (which sounds like this is the goal).
Your mortgage amount of $315k on a $100k salary is more than manageable so I donÔÇÖt see what you have to gain by giving away part of your house/equity.
IÔÇÖd look into doing an offset account.
Lol IÔÇÖm pretty much the same age as you and I help out with my parents mortgage. I donÔÇÖt think it should ever be the other way round.
This is embarrassing unless you pay them back in future.
Yes; you didn’t ask to be born.
If my parents offered that, I would turn around an invest in a mix of S&P500 and VOO, and pretend it never existed until you get older.