5. Make Money: Cash in for retirement – Close mortgage – Sell house to relatives
Suppose you are 60, in 2 years, you may retire (pre-retirement at 62). You still have 5 years of mortgage to pay at $1,100 per month. You have $60,000 of mortgage equity still to pay. You house is worth $250,000.
You sell your house for $250,000 to one of your children. You instantly make $190,000 on the sale (you may still have to pay taxes though). You also do a deal with your relative that you stay for free in the house (they pay the mortgage, or you pay half the mortgage) for another 5 years in the property. In return, you give your child $30,000 of the proceeds which helps them pay the $30,000 worth of credit card debt, so they save $400 per month and their credit score instantly improves. You save on the household mortgage budget $1,100 per month, you also have $160,000 in cash (before taxes) and stay in the house another 5 years for free, or for half the mortgage payments. After 5 years, you may decide to buy a cheap place abroad for $100,000 (like Caribbean, Brazil, Cuba, Thailand, Mexico), and live on your retirement benefits.
The advantage of selling to your family is that you can do a deal with them to cover their credit card debt or any type of debt, including, you can easily sell the house for full value, rather than at a discount only years later to a potential prospect. Same way, if people want to sell their house or are at risk of foreclosure and want to keep their built-up home equity, offer it for sale to family with the chances for them to pay off their credit card debt with part of the proceeds.
Whatever price they pay, $400 per month of credit card debt may be cleared easily, even if the mortgage is $100 per month higher. You have to make sure that the $30,000 of cash-back is not officially part of a mortgage deal, because this could be seen as mortgage fraud, make it look as an inheritable gift to the children. You also have to take in consideration the tax implications for the sale of the house and the inheritable gift.
If you sign a contract in exchange for a cash-back (like the $30,000), make sure this contract is private and never gets in the hands of your bank, because mortgage fraud is a punishable crime. You could even sell the house for a $20,000 higher than the appraised value and use the additional winnings to help your child cover his/her credit card debt. Make sure if you do the wire transfer of the $30,000 you never mention that it was part of a mortgage deal. Just like, inheritance gift. This is a much better alternative than foreclosure or reverse mortgaging, also the property stays within the family.
You could also become a co-signer of the mortgage to ensure that in case your child defaults, you can still cover the house or in case your child cannot get the mortgage from the bank, they can get it after all, to your advantage that you cash in even, if the new mortgage is ever defaulted, the money is yours.
You could also cover any problems of monthly mortgage payments with the $100,000+ proceeds and you could rent it out, suppose your child cannot pay the mortgage anymore, while you could live abroad and the mortgage is almost fully covered by the renters.
