DEAR BOB: I heard there is a way to buy a house or condo with a reverse mortgage and not have to make any monthly mortgage payments. Is this true? Is this a way for a senior citizen to buy a retirement home? –Mr. L.M.
DEAR MR. L.M.: Yes, a “reverse mortgage for home purchase” is available from Fannie Mae. The two other major reverse mortgage lenders, FHA and Financial Freedom Plan, do not offer these special reverse mortgages.
Purchase Bob Bruss reports online.
A reverse mortgage for home purchase usually requires a large, cash down payment, typically around 50 percent of the purchase price. The balance is funded from a reverse mortgage.
Such a reverse mortgage is ideal for the purchase of a retirement home where you obtain the down payment cash from the sale of your former residence. Of course, you must be at least 62 to qualify. Details are available on the Internet at www.reversemortgage.org. Look for Fannie Mae reverse mortgage originators in your state.
DON’T RUSH TO SELL HOME IN YEAR OF SPOUSE’S DEATH
DEAR BOB: My wife passed away recently. If I sell our home soon, can I take the $500,000 principal residence sale tax exemption, or am I limited to just $250,000? You often mention “stepped-up basis” for tax purposes. How does this affect my situation? –Berton McC.
DEAR BERTON: There is no need to rush to sell your home. Take your time to adjust to your new situation without your spouse.
If you decide to sell in 2006, and your wife died in 2006, presuming you and she both occupied the principal residence at least 24 of the 60 months before its sale, and at least one of you held title for that time period, Internal Revenue Code 121 allows you to claim up to $500,000 principal residence sale tax exemption. That presumes you file a joint tax return in the year of your late wife’s death.
However, if you don’t sell the home in 2006, you will probably come out just as well or better thanks to the “stepped-up basis” rule for inherited property. Presuming your wife held title to 50 percent of the home and you inherited her share, your new basis becomes the market value for that half on the date of her death, plus your original basis for the other half.
But I notice your letter is postmarked from a community property state. If the home was community property, then you get a new stepped-up basis for 100 percent of market value on the date of your wife’s death. Please consult your tax adviser for exact details.
WHAT IS EASIEST WAY TO ADD A CO-OWNER TO TITLE?
DEAR BOB: Please tell me the best and easiest way to add a co-owner to the title to my home? –Fran G.
DEAR FRAN: The easiest way is to sign and record a quitclaim deed from yourself to yourself and the new owner. Be sure to specify on the deed how you want to hold title, such as tenants in common or joint tenancy with right of survivorship.
Please consult a local real estate attorney to discuss the possible tax and legal consequences. If you decide to proceed, the attorney can then prepare the quitclaim deed and have it recorded.
The new Robert Bruss special report, “Pros and Cons of Today’s Five Best Real Estate Profit Opportunities,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet delivery 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).