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My mother is 82 and has some cognitive impairment that justify some level of concern on my part. Her house and other assets are in a living trust of which I am co-trustee, if that makes any difference. My mother has mismanaged her money and affairs for some time

  • My mother has a second mortgage on her house that is at a somewhat high interest rate.
  • She tried to refinance last year, but her house is rather dilapidated, and the bank refused based on the value of the house.
  • There are 2-3 really glaring problems (dilapidated siding, a bathroom in poor repair, cracks in walls) that, if fixed, should help with the appraisal value of the house.
  • The balance of her loans was only slightly less than the value of her home's appraisal last year.
  • She balks at spending the money to make the necessary repairs, says she can't afford them, although in my view she has a good income with her pension and SSI.
  • She gets all excited when she gets things in the mail telling her she has been pre-approved for large personal loans. She thinks that this way she will be able to get the money she needs to pay off the second mortgage and make the repairs.
  • My gut instinct is that stuff that looks too good to be true, probably is, and that the best way for her to get out from under this second mortgage is to fix the house up and then start over with the appraisal process with a reputable lender.

Of course, I think she should make the necessary repairs to her house regardless, instead of spending tons of money on expensive skin care products and other unnecessary things, but we all have different priorities, clearly.

In any case, I do not claim to be any kind of financial expert, so it is entirely possible that there are other ways of looking at this situation and other possible solutions I haven't thought of.

  • Added "united-states" tag since I'm guessing that's where you are from. Correct, if wrong. – littleadv Jul 24 '16 at 20:18
  • It's not clear what your question is here. Are you asking whether it is a good idea to take out a personal loan to do home repairs? – BrenBarn Jul 25 '16 at 6:11
  • She thinks she can pay off the second and do repairs with these offers of personal loans she gets in the mail. She asked me to check into it, so that's what I am doing. – Sarah M. Jul 25 '16 at 18:25
  • Any "pre-approved" loan is someone trying to rob you. How you convince her of that, that's your problem. – gnasher729 Jan 9 '17 at 11:07
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Obviously the best way to consolidate the real-estate loans is with a real-estate loan. Mortgages, being secured loans, provide much better interest rates. Also, interest can be deducted to some extent (depending on how the proceeds are used, but up to $100K of the mortgage can have deductible interest just for using the primary residence as a collateral).

Last but not least, in many states mortgages on primary residence are non-recourse (again, may depend on the money use). That may prove useful if in the future your mother runs into troubles repaying it.

So yes, your instincts are correct. How to convince your mother - that's between you and her.

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