Home equity loan not best for elderly homeowner

DEAR BOB: My elderly dad lives in his home alone. He refusesto sell although he owns the $700,000 house free and clear. He could live likea king in a luxury rental apartment, but he refuses to move. The house needsrepairs, especially a new roof. His banker suggests a home equity loan. But Iquestion whether that is a smart idea because he has a very limited income fromSocial Security, stock dividends, and a small pension. He usually listens to meso what should I recommend? –Kathy R.

DEAR KATHY: The banker wants to “sell” a homeequity loan because he gets a commission, whereas the local bank probablydoesn’t make senior-citizen reverse mortgages. Did the banker even mention thatalternative? I bet not.

Purchase Bob Bruss reports online.

Your dad is “house rich but cash poor.” A reversemortgage can provide him with the money needed for a new roof and otherexpenses he might have.

He will have the choice of a lump sum, lifetime monthlyincome, a credit line (except in Texas), or any combination. Most seniorschoose the credit line and use the available funds as they need them, such asfor a new roof, new car or a world cruise.

The big advantage of a reverse mortgage is no repayment isrequired as long as your father lives in his home. But a home equity loanrequires monthly payments.

Because your dad has limited monthly income, adding amonthly payment for a home equity loan to his burden might not be wise. Moredetails are in my special report, “The Whole Truth About Reverse Mortgagesfor Senior Citizen Homeowners,” available for $5 from Robert Bruss, 251Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instantInternet delivery at www.BobBruss.com.


DEAR BOB: My siblings and I inherited our mother’s house. Werecently sold it through a Realtor. It was in poor repair. What is the properprocedure to arrive at the fair market value of the house to correctly computeour capital gain for filing taxes this coming April? –Chuck W.

DEAR CHUCK: When you and your siblings inherited that house,your adjusted cost basis was stepped up to market value on the date of yourmother’s death. If you sold it within a few months after your mother’s death,chances are the sales price and your stepped-up basis are the same.

The result will be no capital gain tax if you didn’t sell itfor more than the stepped-up basis on the date of your mother’s death.

Your Realtor can give you a written market-value opinionletter stating her expert opinion of the home’s value when your mother died.Unless you and your siblings held title to the house a long time after thedeath, you probably owe little or no capital gain tax. For full details, pleaseconsult your tax adviser.


DEAR BOB: Is there a market for partial interests, in thiscase a 50 percent undivided interest in a vacation home? –Sarah G.

DEAR SARAH: There is no organized market for partialproperty interests. Most real estate agents refuse to take a listing for a 50percent interest in a property. Ask your friends and relatives if they want tobuy a 50 percent interest. If somebody is interested, expect to sell at a hugediscount from 50 percent of the fair market value for the entire property.

The new Robert Bruss special report, “When It’s Smartto Prepay or Refinance Your Mortgage,” is now available for $5 from RobertBruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736or 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

Copyright 2007 Inman News

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