dilemma

Feel free to give me your opinion, NYCMatt. Curious where you come out on this.

So in current plan, parents who live in house won't contribute monthly? Not good. Of course, on the other hand, it might not be sound for the younger couple to depend on such income anyway.

Also, what market is this? Bubblicious Canada? Petro-propped London? QEd NYC?

It's a bubbly market. But there's not really an option not to buy (cynically). If the young couple don't buy, they're not going to get the 280k dp.

Agree with Alan.

Unless someone else is contributing to paying this mortgage, no way can they afford a $650K house.

They can afford a $200K mortgage, tops.

Their housing budget is therefore really closer to $425K.

What's afford mean? They have been pre-qualified for a 370k mtge, will get one. Should I donate to the dp or just let them struggle to make the monthly nut (which based on family dynamics, they should get help with as the parents are not going to let the lose the house).

Did they propose a repayment plan? [I'm all questions and no answers.]

alan: well, the plan is for the parents not to contribute in the new house - but of course, if the monthly nut is huge, then they will end up contributing one way or the other (groceries, childcare, etc.)

My experience with young relatives borrowing money is that they will talk a lot about plans, but nothing will ever happen. Maybe I'll get remembered in someone's will.

Cutz the umbilical cord with a dull blade...... What the fk is this perpetual baby shit?

Does the father of the child go suckle on his 60 yo mother's tatas when his boss yells at him. ?

Gmilf

Even though it might eventually come to that, I think you really need to do it as a formal contract with notes, just as if they're getting the mortgage that, apparently, no bank is willing to extend to them.

Unless, of course, you have a strong desire to make a gift to these extended-family relatives, in which case you should simply make it a gift. And also in which case have you explored the possibility that *I* might be distantly related to you? (but not to them)

That's what I would have said before I had kids. I'll wait until they've successfully launched before being judgmental.

Hmm, I would just partially own the house.

AH: The banks are willing to loan!

"What's afford mean? They have been pre-qualified for a 370k mtge, will get one."

OH MY GOD.

Apparently these banks will never f-ing learn, will they?

A nearly $400K mortgage for two people who can barely scrape together $100K in income??

The monthly payment just for the mortgage will be nearly $2200/month. That's nearly HALF their take-home pay! And they haven't yet paid taxes or insurance, let alone utilities. Oh yeah, and FOOD. And other living expenses.

Not to mention any repayment schedule for these relative-originated "loans" for the down payment.

Matt: I did SHORT friggin' bank shares. And that didn't do me any good.

Huh?

At 5%, 370K is about $2,000/month. A couple making 100K can afford this sort of mortgage payment, especially if living with extended family, which will provide free childcare should they need it.

Maly, no they can't.

Not even factoring child care into the equation, there is absolutely no financial planner or expert who will tell you that forking over more than half of your take-home pay (once they include taxes, maintenance, insurance, etc.) for the house alone.

In fact, I know plenty of SINGLES who make $100K and find it difficult to swing $2200/month in rent. And that's factoring in food, laundry, etc. for ONE person, not an entire household.

No financial planner would suggest 100k income & 370k mtge. Reality is that 2 able-bodied and relatively youthful parents (early 50s) will be living with them. Surely they will help, regardless of what their original intentions are, since it'll be their 90k towards the dp?

With taxes and maintenance, housing will eat up somewhere from 35-45% of that $100k. Things are going to be tight for them for years -- but it really does sound like they're making the best choice from the matrix they've got.

I would send them a nice GC from Williams-Sonoma or Pottery Barn as a housewarming, and then let it alone.

ali r.
DG Neary Realty

Ali G- I thought you would offer to come over and give your opinion on the place, for a consulting fee, of course

It reaolly sounds as if you (and possibly the other relatives) are being "guilted" into contibuting to a purchase way over the means of this young couple, who have been encouraged to think that they deserve to live way above their means.

I agree with Alan that you either realize that you are giving them a "gift" (if you feel you are really close to them, and, IMHO that doesn't seem to be the case here) or make it a formal contract.

>"surely they will help regardless of their original intentions"

Dangerous assumption - as they may help with child care now, (and that might well be the extent of their help), and will most likely expect care from their children and grandchildren as they age in place in the house to which they made a relatively minimal contribution (in the context of the purchase price and the relatives all being asked to contribute).

"but it really does sound like they're making the best choice from the matrix they've got."

No it does not.

I'd expect that response from a real estate agent, of course, who benefits only when the MAXIMUM price point is reached.

Their BEST choice would be to look for a significantly more affordable house.

nyc10023: Can't you say "no" and blame it on your miserly partner? (Or rather on your partner's miserly culture?)

Tell them you consulted an astrologer and "computah says naaao".

Ph41: But of course! They expect to age-in-place. But regardless of whether they buy now or later or stay put, they expect to age-in-place with the help of their children & grandchildren. Couple in question won't move away to be independent, so no chance of escaping that obligation.

W81: muhahaha. Everyone knows who the boss is.

The other thing though is that the other set of parents are intent on reducing the mortgage burden on the young marrieds, and if that means handing over life savings, then at some point, I'm on the line.

You might as well co-sign the mortgage loan now.

Apart from comments of others about affordability even at $100K, it sounds like $100K annual income from soon to have child couple will soon be $65K. There is no way anyone could come close to supporting a $370K mortgage on that salary, and making this sort of decision relying on the notion of aging parents providing free baby sitting is fraught with disaster. Before long, they will be providing not-so-free adult sitting for the parents. And, the odds they are stopping at one child is probably non-existent.

Of course, if you and your charitable relatives paper these "loans," the bank financing will probably evaporate.

concur matt concur ali - observe from the back of the mezzanine, income not enough for that kind of mortgage.

and if you do cough up any $ kiss it goodbye. if you get it back, great, likelihood very slim

Another thing to consider is an odd psychological phenomenon that I've observed. The expected situation is that an unpaid lender gets resentful and angry, and it undermines the relationship.

What I was surprised to see, on more than one occasion, is that it's often the BORROWER who gets much more resentful and angry that he owes money, and gets sheepish and cuts himself off from the lender -- not out of evasion, but from "that sinking feeling", feelings of inadequacy, etc.

I've seen this when money is owed between friends; the impact for extended family has the potential to be even worse. So even if you're resigned to it being a "loan", not a loan, and won't be disappointed when there's no repayment, it can still cause bad fallout. So gift or contract.

alan, sounds like you've had some pretty bad personal loan problems. Have you found your relationship with your landlord to be more straightforward than your problems with your bank and your family?

nyc10023, having your finances, I would lend them $20K based on all the numbers and sentiment from your OP.

Most of the time i just read this site to keep abreast of the NYC market and the trends/issues since we became owners there. But this post really made me sit up and take notice...and not in a good way. What would you be teaching this young couple? That they can overextend their finances? That their parents can put their life savings in a real estate market that is by no means stable? That if you can't afford something, you just borrow from enough relatives until it becomes plausible? My very strong recommendation is that the parents stay put, the couple stays with their parents until they can afford something different on their own within their own budget, and that YOU (the very generous and very responsible nyc10023) take the monies you are willing to give freely without thought of repayment and put it into an education fund for new baby. Please please don't make life so easy for them that they don't get to earn the downpayment as well as the rewards that come with planning life judiciously. There are lessons to be learned here and you must let them get this necessary education. Hope this doesn't sound harsh...

@alanhart...You are so very right. We loaned husband's brother money years ago and nearly destroyed a lovely family relationship in the process. yes, the borrower does angry and resentful as well as embarrassed over his/her situation. luckily we were able to talk it out and be done with it but again...one of life's lessons learned the hard way.

rosina, if it were the young couples' parents posting the question here, I would agree with your advice. However, in this case, sounds like the decision to buy has already been made and likely the parents' idea as much as the couples'. nyc10023 really have no say in that decision. It is a stretch for the young couple, but at the end they are unlikely to default on their bank loan. Sure they might be financially stressed, but it will unlikely end in disaster.

Since the decision has been made, nyc10023 can either help or not. nyc10023 has clearly chosen to help.

Here's how I came up with the $20K recommendation...
1. The maximum that should be considered is $40K or 100% of what the couple is contributing.
2. Since it's an extended family, it cannot be the $40K max, so adjusted max is $20-30K
3. Sounds like nyc10023 like the young couple since she wrote: "I do feel a strong impulse to give more to reduce their monthly obligation." ---That impulse could translate to $30K
4. But she also wrote: "I'm not really helping the young couple so much as the parents (who are more distantly related to me)." ---That translate to a $10K deduction, so final max of $20K.

Since nyc10023 can easily afford (write-off) the $20K, and $10K would seem cheap coming from her, that's why I recommend that.

Rosina: what Sunday said. I'm not in the position to influence the parents giving up life savings/selling their house because that is what they (parents) want. Sure, the kids can go and buy a smaller place but that's not an acceptable option to the elders. Remember, the parents want to live with the kids forever.

Sunday: I'm leaning towards joint ownership. That way, I have some control.

Wait, so now you're going in for an even larger "contribution"? i.e. "joint ownership"
What kind of "control" will you really have? You will turn them out if they don't pay the mortgage? You will take the house in foreclosure?

Do yourself a favor and just give them a "gift" as Sunday suggests, and then stay out of it.

And I do, personally, understand Asian culture.

"I'm leaning towards joint ownership."

You can't be serious!!! Is that your idea or did that came from the young couple and/or their parents? If it's your idea it can be taken as an insult or you trying to cut into their profit. If it's their idea, that's some nerve of them to ask. Regardless, a million things can go wrong with such a relationship, especially if this young couple ever ends in a messy divorce!

"if this couple ever ends in a messy divorce".
YIKES! I never even thought about that. Next Thread!

I'm with w67th. I don't get this family dynamics of helping relatives who are relatively well-off and able. And it sets a crappy example for your kids w.r.t. "launching".

Why don't you donate the money to a charity that will help poor people improve their lives? And make sure your kids understand that's where your money is headed (when they grow up sufficiently). Your kids have all the cards stacked in their favor: well-off parents that have means to provide for them, higher than average intelligence thanks to a stacked set of genes, etc. All that's left for you is to not mess it up by setting wrong motivational examples.

OMG. So basically this guy who makes $65,000, wants to buy a house for 10X his income? What if his wife can't work after having the baby - sick baby or sick mommy, etc. They should just stay where they are until they can improve their incomes and save some money, instead of shaking down relatives for loans.

a lot of hostility for young people who need help getting settled into adult family life. strange, coming from a board where the consensus is that everything is much more expensive than when you olds got started, but wages are the same. just thought it's a little odd.

i think it ultimately depends on the greater family dynamics here. when the olds got started, did their olds help them? is this couple really out of line and entitled asking for help or is this just how things happen in your family? someone's in trouble, a relative in a better position will bail out?

i agree with everyone who says if you want any kind of involvement, give what you are comfortable GIVING and put it out of your mind. they're young, they won't be hostile to you later. they'll bombard you with unwanted baby pictures and name their kid after you.

If everybody in the extended extended family hits her up for "loans", soon enough everybody will be named nyc10023.

that's her perogative as the rich relation

Lucille, you are right when you say everything is so much more expensive than when we 'olds' got started. However, i would have to say that speaking for my generation, the wages are proportionately higher also. But you are wise when you say it depends on the family dynamics and if this is a tradition among their culture. However, this 'olds' sees red flags flying everywhere in this scenario and i am not hopeful for the happy ending.
Our parents could not help us fund our first home and so we scrapped and saved and bought the 'fixer upper' we could actually eventually afford. We allowed our children to do the same thing (though we did give them a debt free education) and they clawed their way to their first manhattan apartments. At the end of the day, i really do think nyc10023 would be better off assuring the education of new baby ( a gift revered in every culture) than mingling in these very shaky family finances/dynamics.

"i would have to say that speaking for my generation, the wages are proportionately higher also."

Depends on the time frame.

When I arrived in NYC in the mid-'90s in my early 20s, the benchmark price for a studio rental in PRIME Manhattan was $1000. The thrifty lived in Park Slope, where a studio could be had for $500. You could buy a 2-bedroom 2-bath in the Wedgwood (14th and Fifth) for $310K.

Since then, rentals have roughly tripled ... and that apartment at the Wedgwood is worth at least $1.5 million today.

But ... have INCOMES really tripled since the mid-'90s?

rosina, i actually think that would cause more drama and hostility. they need money for a house. to give money for education instead is basically...kind of an insult to them. if she wants to establish a fund for the children's education separately and unrelated to the housing issue, that would be incredibly generous and welcome. but to give money for something else and not for what they need now....is just obnoxious.

but, lol, rosina. i see we've sucked you in. it always starts with one thread that rubs you the wrong way and makes you want to take a stand.

>When I arrived in NYC in the mid-'90s in my early 20s, the benchmark price for a studio rental in PRIME Manhattan was $1000.
Since then, rentals have roughly tripled ...

Really? so a prime studio is 3K?? ....oh dear

Well when I "arrived' in manhattan in the nineties, I shared a 2 bed (+ office), 2 bath at the printing house for $4500 a month, of which last year was available for $4900 a month
http://streeteasy.com/nyc/rental/619165-condo-421-hudson-street-west-village-new-york

(will bring copy of lease should I attend a future SE meetup)

So you were foolish in the '90s.

Point, please?

I'm late to this party. My two cents: make a gift to the young couple or take a pass. Do not become a lender/creditor within your family. Very, very, very, very bad idea. Risky enough if it is a brother or sister or child. Beyond the very immediate family, it nearly always becomes a source of tension, resentment, and regret.

OMG - what a mess! 10023, stay out of it if you can. if not, give a gift and walk away. if you're comfortable enough to do that, you should also be comfortable enough to offer them some serious financial advice, which is what the entire family needs. and why does "young couple" = exempt from personal financial responsibility???

Okay, to clarify (one side A, the other B):

I'm on team A.
A makes 35k, isn't pregnant, private sector job.
Olds A want to give 150k.

B makes 65k, is pregnant, public sector job (so if disability is an issue, great LTD, blabla, generous parental leave, as good job security as one is likely to get). The couple's 40k savings derive from B.
Couple currently living rent-free with olds B.
Olds B want to give 90k, out of proceeds of 180k house sale.
Olds B want to live with A&B, won't give 90k towards if they couldn't live with couple. Not proposing to help with monthly nut, but presumably some self-interest as to keeping a roof over head.
Olds B are young (very early 50s).

NYC10023 was foolish enough to point out issues with 370k mtge on 100k income to Olds A. Olds A are very concerned, and are considering further exhausting life savings, possibly to zero to help young couple have a manageable mtge. Olds A do not expect repayment or couple to help house/nurse them in their old age. Olds A are much older than olds B. Ultimately, NYC10023 is responsible for care and feeding of olds A (morally, not legally). So NYC10023 doesn't really want to see Olds A exhausting life savings, but doesn't really see what to do other than to possibly (don't get excited) step into Olds A place. But 10023 will not just give or lend money without having a legal stake. Simply because 10023 thinks that if couple has huge equity in house (say 450k of 650k), that couple will simply use that equity if they need a new car, fancy vacation, etc.
Also, in case of divorce, couple will get 50-50 of house in this jurisdiction.

why can't they buy a cheaper house???

One more thing. Olds B want to live in a particular area due to job commutes, and houses there at a bare minimum for the number of bedrooms required cost 650k+.

when everyone wants wants wants, everyone deserves what they get. good luck to you!

Sounds like Olds B ought to commit more (if not up front then on a monthly basis). Depending on long-term expectations they're getting a fairly sweet (disproportionately so) deal for $90K and maybe some babysitting.

That's what 10023 thinks!

The whole situation reminds of one of the most depressing, and most inappropriate for children, books: The Giving Tree.

Too many Giving Trees.

I'm starting to lean towards advising you to take a hard line -- no loan, no gift, big "I love you" so the message is clear that you won't be around for bailout. And inform Olds A that your help for them, if needed, will come begrudgingly with a big "told you so".

Moral obligation indeed!

Bah!

[Of course, the tree in that book wasn't a bubble asset...]

OMG it only gets worse.

So the non-pregnant (and therefore most stable working) half of the couple makes only $35K?????

Inonada: I've read way too much Dawkins. Isn't it "unnatural" to not want to see sharers of your genes housed and fed?

But of course, if I'm able to raise my children (knock wood) to not EVER be in this position of the young couple, I'll be very happy. But this presumes that anything I do will have any effect.

Yeah, the pregnant one had better like her job. No quitting in this lifetime.

final thought (something my husband and I often discuss and sometimes disagree on) - you do your loved ones a serious disservice by bailing them out, by not letting them struggle and fight and find their own way to a solution. they may be "young" but they are no longer children.

Sometimes. Does that apply when the older generation needs help?

NYC10023...Listen to Alanhart. Altruism aside, they are biting off more than they can chew and you may be left holding an empty bag

In which part of the country does this couple live?

>So you were foolish in the '90s
It was the cheapest 2 bed bath in the market prime south of 34th st at the time.

>Point, please?
Point is, your 3x multiple on rents is ridiculous as most things you post

Matt: why?

the oldies have presumably fought their fight (or not). no more life lesson to learn. they should be helped (within reason).

"It was the cheapest 2 bed bath in the market prime south of 34th st at the time."

Bullshit.

"Matt: why?"

I'm trying to figure out how one can make only $35K.

You're all nuts! Since it looks like you'll be carrying olds A in their dotage & you can't control what they do with their money now, you should invest whatever you'd give to the young couple towards the costs of caring for the olds A & give a nice (not lavish!) housewarming gift, with much love, to the young couple. Remember tough love? Everybody else is out on a limb with a saw; you know better, right?

Matt: many entry-level jobs start at 35k outside NYC (and even inside) w/o a professional degree.

Drdrd: good point about investing that amount instead.

Look at today's article on how great job prospects are for this year's new grads. They cite exactly three areas of growth: finance, energy and engineering. What if you have a child who strives and works and has every intention of succeeding, but that success will not be occurring in a high-paying career? WTF is wrong with helping them? Or should we take it all to the grave, and feel morally superior because we didn't make it "easier" for them?

Nothing wrong with effort, or learning thrift. Nothing wrong with providing assistance. Paying for schooling is assistance. Some people think kids should pay for their own education. Some have to. It's not a morality question, it's a question of available resources. Somehow it doesn't seem fair that it should be "easier" for some than others, and on some levels that argument resonates. But that doesn't mean there's any causality between gratefully receiving assistance and a lack of desire to succeed. Hopefully you spend decades instilling a desire to succeed in your children, and they learn to want to succeed for their own sense of self-worth. Eating beans in a fifth-floor walk-up in Queens is not necessary for a kid to want to succeed (and in some kids it has exactly the opposite effect, it's all about the kid and the family dynamics).

Matt, probably he or she is in broadcast journalism.

Where's your triple lutz?
http://www.millersamuel.com/charts/gallery-view.php?ViewNode=1263479298xkoid&Record=2

Putz!

ar - i am not in favor of financially supporting people to live beyond their means. we have been approached by family members to do this. we have said no.

and it wasn't easy...

I think you're talking about 2 different things here.

I'm definitely generally not in favor of financially supporting people to live beyond their means.

But. But. What if it's the gift would be from parents who are well-off to children who are not, but, hard-working? What if the parents would not give to charity upon their deaths, but the $ would go to kids anyway? Not so clear-cut.

i'm not entirely opposed to helping people financially, to giving gifts, to making other people's lives easier. i don't understand why your family members can't re-evaluate and find a solution that is more financially sound without having to ask you or others for "loans". when we were approached by our family members, we discussed the proposal, came to the conclusion that they were making poor financial decisions and told them that. our decision did not impact their safety, health, or general well-being, so we were comfortable saying no.

it wasn't something they needed. it was something they wanted.

I'm sure the 3-against-1 aspect doesn't make it easier for nyc10023, especially if two sets of Olds are willing to put their life savings on Odd. I can't imagine any reasoning happening there, at least with respect to the decision to buy now, and to buy too much regardless of market timing.

AH - I agree. I don't mean to sound judgmental. I appreciate how difficult this is.

This is really a question of family dynamics, because there seems to be no question but that as a RE/finance question, the answer should be no. But to me every additional detail just contributes further concerns. As I understand it, the parents planning to live in are still working full time? (nyc10023 mentioned a need to commute and that they're in their 50s). So for both of the young couple to be able to continue to work and make the 100k, there will not be free child care but a need for paid FT child care, unless one of them leaves their job or drops down to PT? That's a huge additional expense or loss of income coming their way and will further reduce their ability to make their monthly payments. My husband's family had a similar arrangement in some ways -- his grandparents helped his parents buy their first house on the condition that they live with the parents. It was a nightmare because there came a time when the grandparents needed care beyond what his parents could give but they exercised tremendous moral pressure regarding their "right" to remain in the house they helped purchase. Many years of stress and, frankly, less than optimal care for the grandparents resulted.

Does Young B have an open line of communication with Olds B? Cause if you can talk sense into Young A...

BTW, I have had maybe 4 arguments over the last 5 years on spelling the word dilemma.

I can say for a fact in my early youth I was taught to spell it dilemna.
Can anyone else verify they were taught to spell it this way?

I've never heard of "dilemna"... it's not supported etymologically (for what that's worth):

http://en.wiktionary.org/wiki/dilemna

http://dictionary.reference.com/browse/dilemna

http://en.wikipedia.org/wiki/Dilemna

Yeah, trying arguing with a pregnant partner, who also earns bulk of income (shouldn't matter but it does) and whose parents are currently providing free room & board. Sure, young B can convince Olds B. But young B and Olds B are on the same page.

Mommyesq: I'm not related by blood to side B, and have NO influence on that side as to their family dynamics. Eldercare is a fraught situation, one way or the other. The person who will be babysitting works an evening shift, and is paid minimum wage, so it's a wash either way.

darling nyc10023, i am sitting in SC and packing for the interim move back to NYC, and thinking of your dilemma (sp?). You are between a rock and a hard place. God bless you as you are actually trying to do the right thing by all. Trust me, no matter what you do, you will get credit for the effort and i will light enough candles to make sure of that. OMG, i think it is the wine talking....

I wish I had talking wine. My sidecar is the strong silent type.

What rosina said.

It's a quandary you'll think through, and in the end keep Olds-A from giving the store to Olds-B, and avoid being the villain of the piece yourself.

Any plan that includes in-laws living in the home rent free in exchange for down payment money is a bad long term plan. Might I suggest that you move on your own and rent until the time comes that you can do this w/o making such an open ended deal. Rent with your parents and share the rent untiil a time comes that you can live on your own. If your dream is to live with the folks it would be far better for them to live in YOUR house as opposed to the house THEY bought with the down payment money.

Family is more important than real estate.
why risk the long term relationship regardless of cultural imperitives.

Olds B really need to step up here. really. do your utmost to convince olds a of the same, and reassure them by promising that if things go to hell in a handbasket (which they likely will not, precisely because of what you said earlier) that you won't let them drown (the B's, and by extension, the A's).

then give a reasonably significant gift to the B's ($20k, i agree with sunday, maybe $30k), and write off the issue until it rears its ugly head in the future, which hopefully it will not.

"Inonada: I've read way too much Dawkins. Isn't it "unnatural" to not want to see sharers of your genes housed and fed?"

They seem housed and fed in the $180K house. They now want a place that is 3.6x fancier. They have no shame. Having already milked Olds A to the tune of $150K, they are going around trying to milk extended family for "loans". What the fuck is that???

These people want to form a nice little household, that's cool. They've got their own little calculus between the 4 of them maybe. You wipe my baby's ass, I'll change your papa's Depends, etc. Then they drag Olds A into it. Now they're dragging the whole goddam extended family into it. It's not that you heard about their plight and were looking to help, they're pinging you.

It seems you feel some obligation to Olds A. You should tell them they're all idiots for going down this route. When the shit hits the fan, drop $100K to Olds A. You hand over that $100K to any of these people now, they're going to blow through it one way or another. They will make their idiocy work longer w/o your $100K upfront. And I don't think you want to be involved in anything like an ownership stake with these people.