DEAR BOB: Our home has a mortgage. After reading your many articles on the topic, we are convinced we should transfer the title into a joint living trust to avoid probate costs and delays for our two daughters after we are gone. But our mortgage has about 12 years remaining. Can we create a living trust although our home has an existing mortgage? – Tony C.

DEAR TONY: Yes. An existing mortgage won’t prevent you from transferring title for your home into a revocable living trust. Although it is highly unlikely, if your mortgage lender notices the title transfer to your living trust, just supply the lender with a copy of your living trust showing you are the beneficiaries.

Purchase Bob Bruss reports online.

Your mortgage lender cannot enforce the due-on-sale clause when you transfer title into your living trust. For more details, please consult a local real estate attorney.

NO TAX ON BORROWED FUNDS

DEAR BOB: We own a free-and-clear rental property, worth around $600,000. But it needs fix-up work. If we borrow $100,000 on an equity loan, will that money be taxable? – Ginger W.

DEAR GINGER: No. Borrowed money is not taxable, regardless of what your purpose might be.

There is a very good reason. You have to pay the borrowed money back.

Why not borrow more of your equity and spend the extra non-taxable funds on a trip around the world? Or a new car?

DON’T BORROW A SMALL REVERSE MORTGAGE AMOUNT

DEAR BOB: Our home, worth at least $500,000, needs about $60,000 of repairs. As we are senior citizens on a fixed income, we can’t qualify for a loan except at one of those expensive finance company loan sharks. However, a reverse mortgage company will gladly loan us the $60,000 in a lump sum with no repayment required as long as we live in our home. But the up-front loan charges are about $5,400 to borrow $60,000. Doesn’t that seem rather high? – Hugo R.

DEAR HUGO: Yes. If your home is worth $500,000, why borrow only $60,000 on a reverse mortgage? Depending on your age, you surely can qualify for a larger reverse mortgage credit line. Or you can select lifetime monthly income.

Senior citizens often complain about the high up-front reverse mortgage loan fees, as in your situation. Your up-front loan fees will be about the same regardless how large your reverse mortgage is. Shop around to obtain the maximum reverse mortgage for the lowest up-front loan costs.

The new Robert Bruss special report, “Everything Homeowners Need to Know About the $250,000 and $500,000 Home Sale Tax Exemption,” is 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.

(For more information on Bob Bruss publications, visit his
Real Estate Center
).

***

What’s your opinion? Send your Letter to the Editor to opinion@inman.com.

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
Success!
Thank you for subscribing to Morning Headlines.
Back to top