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I'm helping out my mom. Here is the situation.

80K life insurance.
95K mortgage (house is worth 200K)currently 1100 mo payment
25K medical bills
6K misc credit (car, credit card, bank loan about 2k each)
$1500 mo income from ss & military retirement.

Everyone I talk with just wants us to invest with their product. I need basic advice. What do we pay, do we pay down the mortgage. Obviously we need to refi the mortgage, do we refi or take a 2nd.

Right now my best guess is pay off all credit and medical bills, pay down mortgage with all of life insurance. That seems to give the most monthly expendable cash.

Am I missing something?

Thanks,
Ann
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I guess you have $80,000 to invest. Your plan sounds OK, but what is the interest rate on the mortgage? Can it be refinanced at a lower rate? I would save some of the 80K for an emergency fund and invest that in a MM mutual fund with check writing setup.
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I'd certainly pay off the misc debt and medical bills right away. For the mortgage, I'd calculate out what your 'total cost' of refinancing is going to be. Evaluate what the best possible re-fi deal you can get is and at what point do you recoupe the money (closing costs, points, etc.) for refinancing with the new, lower payment. Call me morbid, but if your break even point is out six or seven years (as it often is with refinancing), and your mom is 85, it's not worth it to refinance. She'll most likely be in a nursing home (or worse) before you get your money back. If that's the case, you'd be better off to take that money and put it in to an annuity or some other sort of retirement vehicle and use it as income for your mom (which would also effectively drop her house payment). However, if she's 55, that's a whole different ball game.

JMHO,

-Warthog
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Definetly pay off the med bills and credit card debt with the life insurance proceeds. Questions?? How big is her house? Does she live alone? Does she need as much space as she now has.? How old is she? How is her health? Could the house be sold and buy a smaller less expensive property or less expensive monthly housing. Her present income will not support her current housing situation whether the mortgage is paid off or not. With $1,500 monthly income and income from the approx. $154,000 net cash after sale of home and paying off debts she has many more options.Many times,single seniors try to maintain too big a home, and the property taxes and upkeep just eats away their income.

Lon
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I'm helping out my mom. Here is the situation.

80K life insurance.
95K mortgage (house is worth 200K)currently 1100 mo payment
25K medical bills
6K misc credit (car, credit card, bank loan about 2k each)
$1500 mo income from ss & military retirement.

Everyone I talk with just wants us to invest with their product. I need basic advice. What do we pay, do we pay down the mortgage. Obviously we need to refi the mortgage, do we refi or take a 2nd.

Right now my best guess is pay off all credit and medical bills, pay down mortgage with all of life insurance. That seems to give the most monthly expendable cash.

Am I missing something?

Thanks,
Ann


I made some assumptions here with my suggestions


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Sorry about that. I hit the wrong key.

Assumptions:
1. Your mom wants to stay in the house.
2. Is healthy and fairly young.
3. Having military retirement also meaning medical care (-) the deductable.

That house payment is a pretty big amount. I would definately try to get that lower. You must look at the costs of doing this weighing it against time to recover. Maybe using some of the 80K to pay down a little when I did refinance. Use the rest to pay off the remaining bills. You could leave a little for emergencies, but there is a lot of equity in that house that could be used in a pinch. I recently got a home equity line of credit for 4.7%. Its .3% lower than prime and moves with prime.

I wonder if the hospital will negotiate the medical bills? I know what they bill me and what TRICARE actually pays. They might be willing to settle for less? All you can do is ask. I'm not sure about medical bill payments if they collect interest on the debt or not. One time when I was in college I had a medical bill to pay and I paid $25 per month no interest. I got the impression the hospital was glad I was paying anything. If you could swing that arrangement that would be nice.

If she doesn't want to stay in the house, can she buy a smaller one with the equity in this one, pay off all the bills and have the remaining insurance $$ to help provide income?

JDW


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Have you looked into REVERSE mortgages? She could pay down the debts, etc. and receive a monthly income source for a predetermined timeframe to supplement her existing income, AND remain in the house.

You can do a search and find out more info to determine if this is a viable alternative.

Good luck,
John
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I like the idea of a reverse mortgage as suggested by Kubbi. Especially if she wants to stay in the house.

It's that or refi the mortgage but you need to know if refi will add enough income to cover the bills. Closing costs take time to recover. Look into some online refi info -- it's all there.

Is the life insurance paying a respectable return? Reinvest it if not.

I would pay off credit but do not pay extra into the mortgage.

Basically you do not want to reduce assets -- make them earn max income and get rid of short term debt.
H.
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