How to Die House Broke?
October 7, 2024 9:32 AM
X has inherited a paid-off 3-bedroom house. X has low income, no debt, is single, doesn't have siblings or heirs, and would prefer to move in and live in the house for the rest of their life. Assuming X remains single and lives for e.g. another 25 years, how does X best utilize the value of the house for additional income, such that when they die, they've maximized the value of the house (vs e.g. it all going to the state)?
Or - considering X only has low income - is selling the property and using the proceeds to rent a 1 bedroom an idea so wildly better from a financial perspective that X could have a change of heart?
Or - considering X only has low income - is selling the property and using the proceeds to rent a 1 bedroom an idea so wildly better from a financial perspective that X could have a change of heart?
Is X interested in having housemates or do they intend to live alone? Is occasional AirBnB of one or more bedrooms an option, or something like three month rentals to visiting healthcare workers?
As for the financial perspective that really comes down to specifics:
- What would acceptable rental housing cost, and what would the likely sale price of the house be?
- What are the property taxes and insurance cost for the house?
- How long is the useful lifespan of the current roof/HVAC/siding/etc. on the house and how much will these cost to replace?
- What financial products (mortgage, home equity loan, reverse mortgage) are available to X and what kinds of rates would they get on these?
Also would buying a smaller house or condo be an option? X would get a lot of the security of homeownership but potentially lower tax/insurance/maintenance costs compared to a three-bed house.
posted by mskyle at 9:52 AM on October 7
As for the financial perspective that really comes down to specifics:
- What would acceptable rental housing cost, and what would the likely sale price of the house be?
- What are the property taxes and insurance cost for the house?
- How long is the useful lifespan of the current roof/HVAC/siding/etc. on the house and how much will these cost to replace?
- What financial products (mortgage, home equity loan, reverse mortgage) are available to X and what kinds of rates would they get on these?
Also would buying a smaller house or condo be an option? X would get a lot of the security of homeownership but potentially lower tax/insurance/maintenance costs compared to a three-bed house.
posted by mskyle at 9:52 AM on October 7
There is a few things to think about: can this person afford property taxes on the home? Utilities? Can this person afford basic and sudden repairs on the home as is. Is the person able to do tasks around the house to save costs ( fix a leaky sink) and be aware of regular upkeep such as cleaning dryer vents, upkeep of heating systems and other routine house tasks?
Given the ownership and the ways rents are rising, staying as long as possible is probably isn't a terrible idea. Selling and buying a smaller property in full with accessibility features for aging in place may make more sense to reduce some of the costs above.
Renting the house or rooms in the house is possible but also full of dangers that someone with little income may not be able to afford. For example, evicting a tenant can be expensive! A left on sink can cause lots of damages quickly. And then there is legal rights of those tenants for repairs.
Depending on your area there may be low income programs to help with repairs and other resources but that may not be a guarentee when you need them.
posted by AlexiaSky at 9:52 AM on October 7
Given the ownership and the ways rents are rising, staying as long as possible is probably isn't a terrible idea. Selling and buying a smaller property in full with accessibility features for aging in place may make more sense to reduce some of the costs above.
Renting the house or rooms in the house is possible but also full of dangers that someone with little income may not be able to afford. For example, evicting a tenant can be expensive! A left on sink can cause lots of damages quickly. And then there is legal rights of those tenants for repairs.
Depending on your area there may be low income programs to help with repairs and other resources but that may not be a guarentee when you need them.
posted by AlexiaSky at 9:52 AM on October 7
I suppose OP would have mentioned if they also had 401k or other retirement savings which at some point (if they live long enough) they would need to take Required Minimum Distributions from. This is the kind of edge case that a fee only fiduciary financial planner would factor in (I think, I am not one).
posted by forthright at 10:00 AM on October 7
posted by forthright at 10:00 AM on October 7
Assuming one can cover the remaining carrying costs, living in a paid-off home is a wonderful experience. Hypothetically selling this particular property to buy another outright or nearly so that has fewer associated costs and/or improved features seems reasonable to me, but it'd take a lot to convince me to liquidate such a home for rent payments. X might just try it for a while before deciding to make any changes, because it really does transform one's budget to know that, (almost) whatever else happens, there is a very long timeline on ever being homeless.
posted by teremala at 10:05 AM on October 7
posted by teremala at 10:05 AM on October 7
Low income is almost certain to rule out a home-equity loan. A reverse mortgage is likely the best path to staying in the house and being able to keep up with maintenance costs and property taxes.
Another thing to consider is whether, and what type of, assets would interfere with qualifying for any programs X might anticipate needing or using, like SSDI or Medicaid. In some cases, a house is protected while a big pile of money is not. But income, for example from a reverse mortgage, might interfere.
posted by Dashy at 10:05 AM on October 7
Another thing to consider is whether, and what type of, assets would interfere with qualifying for any programs X might anticipate needing or using, like SSDI or Medicaid. In some cases, a house is protected while a big pile of money is not. But income, for example from a reverse mortgage, might interfere.
posted by Dashy at 10:05 AM on October 7
reverse mortgages were built for this exact case, but you have to be over 62 to qualify for one. Whether or not selling it makes sense depends on a lot of factors as pointed out above. Mostly how expensive maintaining the house is likely to be, how new the key appliances and things like the roof are, and what the property taxes are. If those are hard to afford for them, then selling it might make the most sense
posted by dis_integration at 10:12 AM on October 7
posted by dis_integration at 10:12 AM on October 7
There are some missing variables that would help to answer this. "Low income" is non-specific -- are we talking minimum wage or a teacher's salary? Where are they, and are they willing to move?
As an example, I live in Durham, NC. Inheriting a house that's paid off here would be great, but depending on where it is and their actual income, the property taxes, insurance, and upkeep might be too much. Whereas they could sell the house pretty quickly for probably upwards of $400K. If they were willing to move somewhere cheaper, $400K would go a long way toward rent and such for the next 25 years, especially if they invested that money well.
Home ownership can be pretty spendy if anything breaks. Can they afford to put on a new roof or deal with a sewer line problem or tree removal if needed on short notice? The benefit of renting is that's Somebody Else's Problem. Then again, if X doesn't face any of those problems in the first few years, they could sock away a decent amount of change by not paying rent.
posted by jzb at 10:56 AM on October 7
As an example, I live in Durham, NC. Inheriting a house that's paid off here would be great, but depending on where it is and their actual income, the property taxes, insurance, and upkeep might be too much. Whereas they could sell the house pretty quickly for probably upwards of $400K. If they were willing to move somewhere cheaper, $400K would go a long way toward rent and such for the next 25 years, especially if they invested that money well.
Home ownership can be pretty spendy if anything breaks. Can they afford to put on a new roof or deal with a sewer line problem or tree removal if needed on short notice? The benefit of renting is that's Somebody Else's Problem. Then again, if X doesn't face any of those problems in the first few years, they could sock away a decent amount of change by not paying rent.
posted by jzb at 10:56 AM on October 7
So I would probably let the practicality of aging rule here and sell a 3BD house and buy a 1bed or 2 bed apartment. I really cannot emphasise enough how aging makes everything impossible: climbing stairs, keeping the roof on a house maintained, cutting grass, clearing gutters -- It is all too much and if you don't have the cash to pay people for these services, it's a disaster. If I could sell this house and get into an apartment, I would. And my house is MUCH smaller than yours -- 2BD 1BA 700ish square feet. And it is absolutely unmanageable as my physical abilities decline.
Since like you we have no kids and DNGAF about leaving this leaking disaster we cannot rid ourselves of to someone, I will reverse mortgage the absolute fuck out of it to be able to make some of the accrued value useable to me in my lifetime. But again I have to emphasise that living this reality, that option is a far second place to selling and securing something manageable.
posted by DarlingBri at 11:23 AM on October 7
Since like you we have no kids and DNGAF about leaving this leaking disaster we cannot rid ourselves of to someone, I will reverse mortgage the absolute fuck out of it to be able to make some of the accrued value useable to me in my lifetime. But again I have to emphasise that living this reality, that option is a far second place to selling and securing something manageable.
posted by DarlingBri at 11:23 AM on October 7
I would definitely worry about upkeep costs and aging in place, if it is an older house.
posted by matildaben at 11:25 AM on October 7
posted by matildaben at 11:25 AM on October 7
I am a big fan of cooperative living with roommates, but given the complications and circumstances I agree with DarliBri. X should sell the 3 bedroom house and use the funds to buy a modest condo in a building where they won't have to worry about any maintenance or upkeep, where they can afford the monthly payments, and where they don't have to worry about roommates.
posted by Winnie the Proust at 11:55 AM on October 7
posted by Winnie the Proust at 11:55 AM on October 7
Eh, I know of just way too many homes where they said "screw it, not my problem" as they aged. Mold. Hoarding. Plumbing that works for 1 but not for a household. Shoddy electrical that works for someone who doesn't eat much but certainly couldn't cook a Thanksgiving turkey. As long as the roof isn't falling down, it's livable, depending on the whims of one aging person.
It's not what I would do, but a reverse mortgage and some credit cards is right up the alley.
posted by The_Vegetables at 12:45 PM on October 7
It's not what I would do, but a reverse mortgage and some credit cards is right up the alley.
posted by The_Vegetables at 12:45 PM on October 7
Mostly how expensive maintaining the house is likely to be, how new the key appliances and things like the roof are, and what the property taxes are. If those are hard to afford for them, then selling it might make the most sense
To be a little more specific, when you have a reverse mortgage, you remain responsible for insurance, taxes, and maintenance. The servicer will foreclose and do a fire sale of the house if you don't keep those up (the former two especially). While in this specific scenario, if the person is over 62, a reverse mortgage might not be the worst idea, they should only enter into it if they are confident they can meet those expenses. The person should also keep in mind that aging alone they are likely to need to pay for services and thus have some cash flow (or else be dependent on the state; there may be some restrictions on eligibility with the reverse mortgage, but also with a lump sum from a sale!).
It's hard to say if renting would be better (even if they are confident they can meet regular expenses); so much depends on the local rental market, the likely price from the house, whether the house is suitable for aging in (so important--see comments above), the condition of the house...in NYC, for example, I'd be hesitant to commit a low-income 62-year-old to the whims of the rental market unless they could find a rent-stabilized place.
In short, this is very complicated and your friend would be well advised to talk to a financial planner (fee-only) who specializes in senior finances.
posted by praemunire at 1:38 PM on October 7
To be a little more specific, when you have a reverse mortgage, you remain responsible for insurance, taxes, and maintenance. The servicer will foreclose and do a fire sale of the house if you don't keep those up (the former two especially). While in this specific scenario, if the person is over 62, a reverse mortgage might not be the worst idea, they should only enter into it if they are confident they can meet those expenses. The person should also keep in mind that aging alone they are likely to need to pay for services and thus have some cash flow (or else be dependent on the state; there may be some restrictions on eligibility with the reverse mortgage, but also with a lump sum from a sale!).
It's hard to say if renting would be better (even if they are confident they can meet regular expenses); so much depends on the local rental market, the likely price from the house, whether the house is suitable for aging in (so important--see comments above), the condition of the house...in NYC, for example, I'd be hesitant to commit a low-income 62-year-old to the whims of the rental market unless they could find a rent-stabilized place.
In short, this is very complicated and your friend would be well advised to talk to a financial planner (fee-only) who specializes in senior finances.
posted by praemunire at 1:38 PM on October 7
"Low income" is non-specific -- are we talking minimum wage or a teacher's salary?
There are two common definitions of "low-income" in the US when it comes to qualifying for programs:
posted by hoyland at 6:31 PM on October 7
There are two common definitions of "low-income" in the US when it comes to qualifying for programs:
- household incomes less than 80% of Area Median Income (this is what Section 8 uses)
- some multiple of the federal poverty level (often 150% of the federal poverty level)
posted by hoyland at 6:31 PM on October 7
A little more unsolicited advice: do not get a mortgage. Pay for the apartment in cash. Keep a nest-egg. Make sure you can pay the taxes and monthly fees with social security.
posted by DarlingBri at 5:38 AM on October 8
posted by DarlingBri at 5:38 AM on October 8
You are not logged in, either login or create an account to post comments
posted by amarynth at 9:51 AM on October 7