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Q: Recently I received an unsolicited letter from my bank offering me a pre-approved $100,000 home-equity credit line at no cost for the first year. After that, there is a $50 annual fee. I have about $250,000 equity in my home. Although I don't need any money, as my wife and I have plenty of liquid investments, it would be nice to have a home-equity credit line, with its checkbook sitting in the drawer. The interest rate is at the prime rate. Should we accept this offer? Derek D.
A: That's a no-brainer. Yes. Accept that home-equity credit line. You never know when you might need quick cash, which you will be able to obtain just by writing a check. Personally, I have home-equity credit lines on both my principal residence and a second home. Smart bankers realize home-equity credit lines are the safest, most profitable way they can lend money. The default rate is virtually zero. That's because homeowners will do everything possible to avoid losing their homes. Even if you never use your home-equity credit line, you will enjoy knowing it is available if an emergency arises. . . . Q: About five years ago, I stupidly added my adult daughter to the title of my home as a joint tenant with right of survivorship. At the time, I was in poor health and she was taking care of me. Well, I recovered and am now in excellent health for age 68. But my daughter and I have had a falling out. She won't speak to me. When I recently contacted her to sign a quit-claim deed so I can sell my home to use the money to go into a life-care home, she refused to sign. She claims she is entitled to 50 percent of my home's sales proceeds. Then she said she can even force the sale of my home. Is this true? Jennifer H. A: In most states, the answer is yes. A joint tenant, or a tenant in common, can usually bring a successful partition lawsuit to force the sale of a property. Of course, it is up to the judge to decide. But in most situations, the court will order a partition sale of the property with the sales proceeds divided between the co-owners. Your situation shows why co-owners are usually better off holding title in a living trust, partnership, REIT or other ownership form where a partition action is not available. For full details, please consult a local real estate attorney. . . . Q: In 2001 I paid off a Small Business Administration loan secured by my home. Since then, I have been trying to get the county assessor and the tax collector to clear my title of this lien. But no written confirmation of my request to release this lien has ever been sent to me, although I have written several times. What should I do? Lucille D.
A: No wonder you haven't received a reply. You're asking the wrong person. Only your mortgage lender can clear your title of that SBA mortgage lien. The county (or city) recorder of deeds just records documents. The tax assessor and tax collector have nothing to do with clearing your title when you pay off a secured mortgage. You should be contacting the lender of the SBA mortgage you paid off in 2001. It is the lender's responsibility to record, or at least deliver to you for recording, a deed of reconveyance or a satisfaction of mortgage. Have you checked the title to your property? Perhaps the lender properly recorded the document to clear the SBA lien from your property. . . . Q: I am a 67-year-old, healthy retiree. But my wife and I are "financially challenged" and need extra income to supplement our Social Security and other income. Our two daughters, for sentimental reasons, do not want us to sell our home or get a reverse mortgage. After my wife and I pass on, one of them will buy out the other and live in the house with her family. In return, they will jointly pay half of our current mortgage payment ($1,200 per month) which may make us survive financially. By accepting their financial help, they want to be sure after I am gone, my wife (their mother) won't sell the house. I told them, if we accept their offer, I will add their names to the deed as joint tenants with right of survivorship. Will I be doing the right thing? Perry P. A: I'm sure you and your wife love your daughters and they love you. But they are primarily looking out for themselves, not for you and your wife. The situation you describe can be potentially very dangerous. Why let your daughters control your life by putting their names on the title to your home? If you and your wife have a substantial equity in your home, why give up all the benefits of a reverse mortgage for a mere $600 per month from your daughters? A reverse mortgage, depending on the market value of your home and the ages of you and your wife, can provide all the cash flexibility you need. You can choose among any combination of a lump sum (perhaps to pay for a new car, a new roof or a vacation cruise), lifetime monthly income and/or a credit line. If you and your wife are struggling to pay that $1,200 mortgage payment, I suspect you have other financial needs. . . . Q: I recently was offered a mortgage refinance at a bargain interest rate. The loan officer locked in my interest rate. But the problem is the mortgage contains a stiff prepayment penalty for the first three years. Do you think this is a big risk for me? Russ R. A: Although I don't like mortgage prepayment penalties, unless you think you will be refinancing again within the next three years, I wouldn't reject a bargain interest rate just because the new loan has a prepayment penalty. Lenders have learned to insist on prepayment penalties because some borrowers will refinance again if interest rates drop as little as one-half percent. However, be sure the prepayment penalty does not apply if you sell the home. That is very important. . . . Write Robert J. Bruss at 251 Park Road, Burlingame, CA 94010. Questions also can be sent to
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. His Web site is www.bobbruss.com
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