Posted on: 24th Apr, 2009 12:53 pm
My parents are currently $210,000 in credit card debt and borrowing cash against credits cards to pay other credit cards. They owe $70,000 on their house which was appraised at $180,000. They also own 7 acres of land with a pond (outright-no mortgage). We have been looking at refinancing the house and land to pay off the credit cards, however, my parents are near retirement and I don't think they'll be able to afford the monthly payments. We also considered selling the land but with today's economy don't think that we'll get what we need or that it will be sold quickly enough. Every month that goes by they dig a deeper hold. I am considering buying the land for $210,000 (to pay off the credit cards) then reselling the land once the economy improves. Do you think this is a good idea? Also what taxes would my parents have to pay on the sold land. Any other suggestions would also be appreciated.
Hi
It sounds like a good idea. You can buy the house and help your parents pay off the credit card debt. I think your parents can transfer the title through a warranty deed to you as a gift. You will be required to pay a certain amount of gift tax, but there are gift tax exemptions which you can claim.
It sounds like a good idea. You can buy the house and help your parents pay off the credit card debt. I think your parents can transfer the title through a warranty deed to you as a gift. You will be required to pay a certain amount of gift tax, but there are gift tax exemptions which you can claim.
It is tough to give sound advice without knowing ALL of the details and seeing the entire financial picture. However, you should consider this..
1. The interest on your home or lot loan will be lower than the interest on your credit cards (unless there is some kind of low introductory offer)
2. The interest you pay on your home loan is tax deductible. So, each dollar of interest you pay there comes with that added tax benefit.
3. Your concern about your parents having trouble affording the payments during their retirement is valid. However, their payments on the high interest credit cards may be even higher than that. It could ruin their retirement.
The first thing I would do is try to negotiate with the credit card companies to lower the balances. I have a feeling that a good portion of the $210k is accumulated interest. The banks may consider forgiving some of the debt if they believe your parents would otherwise file for bankruptcy. THEN, you could potentially sell the property and cover what is owed on the newly negotiated balances.
1. The interest on your home or lot loan will be lower than the interest on your credit cards (unless there is some kind of low introductory offer)
2. The interest you pay on your home loan is tax deductible. So, each dollar of interest you pay there comes with that added tax benefit.
3. Your concern about your parents having trouble affording the payments during their retirement is valid. However, their payments on the high interest credit cards may be even higher than that. It could ruin their retirement.
The first thing I would do is try to negotiate with the credit card companies to lower the balances. I have a feeling that a good portion of the $210k is accumulated interest. The banks may consider forgiving some of the debt if they believe your parents would otherwise file for bankruptcy. THEN, you could potentially sell the property and cover what is owed on the newly negotiated balances.
