No, you really don’t. Refer them to a financial advisor, if you’d like, or give them some advice if they seek it. Beyond that, it’s none of your affair.
As an overview, no matter what you do Hubzilla, you need to get out of this “intervention” mindset unless the PIL are borderline senile, or this amounts to their life savings they are putting on the line. I’m serious … you will desroy multiple relationships and piss people off beyond imagining. Most people cautioning you on this are speakling from bitter experience. Lecturing elderly adults on how to spend their money rarely has a positive outcome for the lecturer if they are not inclined to listen.
If they are determined to do this the best thing you can do is to direct them to reputable lawyers or accountants to structure a deal with a fall back position where they can get the property back quickly and dispose of it if the deal fails.
This might be true, but it ignores a reailty in which tens of thousands of American families do, in fact, pay more than 30% of their gross income in housing costs.
Also, a really important issue is how much it is costing them to rent a place in Hawaii now. After all, if rent and other associated housing expenses (utilities, etc.) are not leaving them much more than $1500 a month, then what’s the difference? At least paying a mortgage the money is going into their own property.
Of course, if their current rent is leaving them $2000 a month for other expenses, then that’s a different story.
To answer the OP; sorry, NO. Excellent resource, and very unbiased, is bankrate.com; lots of info, up to date rates in all states, calculators, advice with testimonials, etc. Regardless of your leverage to persuade, perhaps the cold hard facts of simple math can sway your relatives. Or not. Good luck. :dubious:
Thank you all.
We tried circumspectly to mention it, and the PIL’s got really defensive. “You don’t trust them to pay?”, “Why do you want them to fail?”, etc. So, we backed off and feel that, yes, it is truly none of our business.
We dropped off a spreadsheet showing how much they make, how much the mortgage is and how much we estimate other expenses to be (not knowing how much credit card debt, etc they have). They said they’d look it over with the Australians and see if it will work.
They’re so excited about getting the house that I doubt it will make any impact. But, we tried, and hopefully* we won’t be saying “I told you so” a few months from now.
My opinion is that once you clearly state your concerns to your PIL, once, you should butt out. It’s simply not your business. And they are at least putting the home under THEIR own name, which indicates they are taking their own precautions. They could have chosen to arrange matters to put the deed under the Australian’s name, and the home might be lost if they defaulted on the mortgage. This way at least the parents can decide whether to protect the asset by paying off the debt, selling off the property, or something else.
I have a coworker who’s parents allowed allowed her to buy their house when they had a new one built. Even the old house was way out of affordability range, so the parents simply lowered the price until the bank said “yes, we’ll finance it”, and it’s now owned by my coworker. If she defaults (and we at work all believe she will because she is TERRIBLE with money), the bank gets the house, and the parents lose the approx. 75K gift they made in cutting the price.
As a single guy in NYC years ago, I was paying two weeks salary for my rent…and living alone, I had to do with a lot of baloney sandwiches for lunch and macaroni and cheese dinners, but I always found the money to go out and party on the weekends. Priorities are different, and for me - and the cost of living in NYC, that just seemed normal.
But the bare bones of fifteen hundred a month to pay for utilities and food and gas and insurance and…as others have duly noted, it is madness.
I can top that story though for sheer balls…a relative married a very wealthy woman and the second cousin of the guy, a young woman of about 20 with miserable credit, wrote them a letter and said, “buy me a house. I have always wanted to own one and you can afford it.”
They didn’t buy her the house. But I have always been amazed at the fact that this woman really expected them to do that.
Sounds to me like the Australians and your PIL are all living in financial denial. Stay away from it…you offered your two cents, and they weren’t interested in hearing it. Too late now. You two should just settle back, make some popcorn and watch the train wreck.
I know many households in Vancouver that are paying 50% of their gross income on their mortgage. They all went crazy with super-low interest rates and bought as big as they could, but all it will take to crush them will be a leaky roof (verrry common in Vancouver), an expensive car repair bill, or a 1 percentage point increase in interest rates.
I’m guessing that there will be a flood of foreclosures in Vancouver starting 3 years from now.
Well, Hub, you did all you can. Now you and the missus need to stay out of it. Completely. Although I’m afraid within a year to eighteen months you’ll be posting again about the train wreck this turned into.
Again, as long as the in-laws are competent and not being taken advantage of, then you’ve done all you can. Although this defensive “You want them to fail!” would get a 
from me. Explaining reality means you want them to fail?
I don’t understand something else: the cousins are insisting on buying a house because they don’t want to pay rent. Well, they AREN’T going to be buying this house. The in-laws are. What they are going to be paying is RENT. A rent equivalent to PITI, but rent all the same. They are not going to own the house and the house isn’t in their name, so what makes them think that this arrangement is any different from renting from a stranger?
You know what’s different? A stranger will evict them if they don’t pay the “rent” on time. I’d bet my pinkie toe that they are counting on relatives being more kind-hearted if they are late with the payments.
But unless they are senile or getting there, there’s nothing you can do if your in-laws want to ruin themselves.
Update time.
First the good news. My parents-in-law (PiL’s) made enough of a down payment that the Aussies don’t have to pay their mortgage for the first 2 months. I sincerely hope they used this gap to save up.
So not a trainwreck yet, but the wheels are jiggling on the track. We heard this from my sister-in-law (I wasn’t present). She basically told us how the PiL’s might’ve listened to us a little bit, because they wrote up a contract on the Australians’ payment plans. It was pretty stern on what would happen if they didn’t pay: move out so my PiL’s can find a new tenant to rent it.
The Aussies seemed fine with this until they got to the part about the taxes. My PiL’s would get 75% of the tax return, the Aussie’s 25%. This is based on the down payment (which was actually closer to 85 to 15%). The Aussies complained that they thought it was a 50-50% ownership. The Aussies were telling us before how the big tax return that comes with owning vs renting is the MAIN reason they wanted to buy a place. They were shocked that they wouldn’t be getting that nice tax return to offset the expenses.
I honestly wonder if they knew there’s more to owning a house that a tax return. Worse, it tells me they didn’t seem to appreciate the gigantic risks the PiL’s are taking on their behalf. Not a good start.
The Aussies then announced their solution to this “tax return problem”. They planned to refinance in a year and put the house under their name solely, no longer sharing with my PiL’s. My PiL’s were suprised at these plans and reminded the Aussies that they would have to do something about the PiL’s down payment ($30,000) so my PiL’s would no longer be co-owners. Aussie reaction: :eek:
Never mind that no bank in the world would accept their refinance plan based on their income, but they didn’t even consider my PiL’s investment/risk. I almost wonder if they thought my PiL’s 30K a gift!
The meeting ended with the Aussie father moaning “We should’ve just rented!” :smack:
Well I suppose everyone has to learn the ways on the world sometime even if it is a few decades later than others. How did they ever manage with that mentality in Australia?
I’m not a lawyer or an accountant, but I’m skeptical that these people can assign shares of tax liability by simple agreement among themselves. Can you clarify just who is the official, on-paper purchaser/owner? I got the impression from earlier posts that it’s the parents, but perhaps I’m wrong. It kind of sounds like the parents are buying the home, and slowly giving away equity in it (by means of a private contract) in exchange for the Aussies taking over the mortgage payments, Is that a fair description?
I sincerely hope they had a competent attorney look at their contracts. If is not carefully drawn I’d be quite concerned about tax and titles issues for both parties. If they’re handling this in a way that might legally be considered “gifting”, the parents might have a nasty surprise coming.
I heard all these things second-hand, so I do not have all the exact details. After presenting the numbers, I’ve been totally staying away from the situation. So far away that I haven’t even visited the Aussies’ new place. This is the first I’ve heard about the situation since August.
I did peruse their contract a while back, but did not offer any commentary. I made an offhand remark they check this with a lawyer, but I don’t think they did that. I assume they just made up the contract on their own, which they signed and got it notarized.
As far as I can tell, it is under the PiL’s name. The Aussies have been put on the loan to “build up their credit”. I don’t know the specifics, but that’s what the contract said. My WAG is that the PiL’s file the taxes, get the return, and write the Aussies a check for 25% of that. But since the Aussies are on the loan as co-signers(?), I don’t know how that works. I can only trust the lenders knew what they were doing (?).
With the Australians’ attitude (and of course income), I truly wonder if they’ll still be in that house come tax time. Before, I was a little contemptuous of them getting the house. Now I feel sorry for them… they had/still have no idea. On the other hand, it’s not like they listened had we warned them.
I’m a little confused. Exactly how much money do the Aussies think they’ll get back in taxes? Are you talking state or federal?
If your PILs own the house, then they get to deduct the interest payment of the mortgage off what they owe in taxes. We’re not talking about a huge difference of money here…maybe a few hundred dollars?
If the Aussies want to refinance, great. But they should definitely pay back the down payment. Otherwise, your PILs can report the “gift” to the IRS and then the Aussies would have to pay taxes on that.
Good luck on staying out of it. Let us know if and when the train starts to derail.
What the hell are you talking about hubzilla? This is a godsend to the family. You live here and I live here so tell me, where the hell are they going to rent a place for $1500 a month? Waianea? Ewa is over that already, hell the duplex I live in go for $1200 and they are only two bedroom units.
I think your PIL should go to the county clerk and check out the deed, and check with the tax office records. Find out who owns the house legally.
Then consult with a real estate attorney to avoid being screwed. They might have to end up putting a lien on the property to guarentee they will get their $30K back.
I like the majority of advice here.
Since this bird has flown: I think the Aussie’s have two choices to make this work: Either increase their income with better jobs or do it by one of them or, maybe both, parents taking second jobs. I hope the 14 yo can be relied upon to watch the 10 yo while the parents work.
One small point: If the Real Estate market is as hot as you say and the PIL are already settled & not looking to buy – their exposure/risk may not be all that great - hopefully – in the likely end scenario - they can get a quick tenant or make a fast re-sale and recoup any monies they outlaid without a disastrous result on thier situation economically.
IANAReal Estate Mogul but should the PiL be able to handle the cash crunch short term and I’d bet they make money out of the deal if they eventually have to sell or rent. As long as they don’t get strung along somehow…
A gift is not counted as “income” for the recipient. The person receiving a gift never has to pay taxes on it. It’s the one making the gift who can end up owing taxes on it. I realize this seems counterintuitive, but go to the IRS web site, and take a gander at Publication 950. In short, the PILs could get burned twice - they could never see their $30k again, and then, for added pleasure, could end up owing taxes on it!