DEAR BOB: My wife and I missed the mortgage refinancing “boat.” We thought interest rates would drop further. Instead, they went up. But a mortgage broker friend suggests we instead get one of the new “interest-only” mortgages to keep our payments down. He showed us how our monthly payment will be less than if we refinance with an amortized mortgage. What do you think about the new interest-only mortgages? – Thomas V.
DEAR THOMAS: I especially like interest-only mortgages for investment properties, such as rental houses and apartments. The reasons include (1) minimum monthly mortgage payments; (2) the entire payment is tax-deductible interest; and (3) the low payment maximizes cash flow from the rental property.
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But your situation as a homeowner is a bit different. If you plan to stay in your home a long time, you probably want to build equity and eventually own the home free and clear when you are a retired “old geezer.”
However, if you and your wife expect to stay in the home less than 10 years, an interest-only mortgage might be ideal. The primary reason is there is very little mortgage equity build-up during the first 10 years of a mortgage and every payment is fully tax-deductible itemized interest.
LOW CONDO MONTHLY FEES DECEIVED CONDO BUYER
DEAR BOB: I bought my condo just a little over a year ago. One of the main reasons for my purchase was the ultra-low monthly homeowners’ dues of only $180. But at a recent monthly meeting of the homeowner’s association, we learned the dues need to be raised to pay for maintenance and reserves. My monthly fee will increase to $280. Being the newcomer, isn’t there some law against such a high increase? How could 30 presumably sane condo owners have let the situation get so out of control the dues had to be jacked up so much? – Tommy T.
DEAR TOMMY: Consider yourself fortunate you got to enjoy the low monthly fee for a year before the substantial increase. Before purchase, you should have reviewed the condo association financial statements and reserve accounts. You should also have read the monthly homeowner association meeting minutes for at least six months to see if there was any discussion of a dues increase.
Depending on what services are included in your monthly condo fee, although you probably don’t think so, you still have a reasonable monthly fee. Your situation provides a valuable lesson to ask lots of questions before buying a condo.
NEWLYWEDS (AGE 82 AND 76) ASK ABOUT HOME TITLE
DEAR BOB: I am 82 and my wife is 76. We have been married three years. Her home suited our needs much better than mine so we reside in hers. To simplify bequeathing the home to her children, we left the title in her name. If she dies first, I can remain in the home for two years after her death. If I die first, she gets my social security survivor’s benefit plus a pension from her former marriage and a nursing home policy. Are there any pitfalls to our current arrangement? – Henry G.
DEAR HENRY: If your wife dies first, it would be better if her will or living trust provides a life estate for you to remain living in the house as long as you wish. Two years can go by very fast. What will you do if you are in poor health when her children force you to move out? Heirs can be very cruel, especially when they see money waiting.
The new Robert Bruss special report, “Secrets of Tax-Free Reverse Mortgage Income for Senior Citizen Homeowners,” is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com. Questions for this column are welcome at either address.
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