Too young to maximize reverse-mortgage benefits

DEAR BOB: I am 63 and hope I can continue working until I am70 when my Social Security benefits will nearly double. My $935,000 home needsabout $30,000 in repairs. I had hoped to live on reverse-mortgage income untilI retire, but the amount I would receive is so small I couldn’t afford the repairs.It seems I have no recourse but to sell my 50-year-old home. Any suggestions?–Helen W.

DEAR HELEN: Your real problem is you are too young and yourlife expectancy is too long to gain maximum benefits from a senior-citizenreverse mortgage. Because you didn’t mention any existing mortgage, I willpresume there is none.

Purchase Bob Bruss reports online.

Another possibility is to obtain a home equity credit lineto pay for the $30,000 of repairs. But the big drawback is a home equity loanrequires monthly payments whereas a reverse mortgage does not require anypayments.

As you probably know, there are three nationwidereverse-mortgage lenders: FHA, Fannie Mae and Financial Freedom Plan. FHA andFannie Mae are usually best for homes worth up to $500,000. Above that,Financial Freedom Plan often is the best alternative.

Please consult a reverse-mortgage representative who offersall three plans so you can compare them. You can find reputablereverse-mortgage originators at


DEAR BOB: You often mention Internal Revenue Code 121. Toqualify, you say the principal-residence owner must reside in the home at least24 of the last 60 months before its sale. Does that mean I have to own my houseat least 60 months before I qualify for the $250,000 exemption? Also, you saythis tax break can be used every 24 months. How does that fit in with the 60months? –John L.

DEAR JOHN: Internal Revenue Code 121 is very flexible. Toqualify for the principal-residence-sale exemption up to $250,000 for a singleowner, or up to $500,000 for a qualified married couple filing a joint taxreturn, the seller(s) must have owned and occupied their primary dwelling anaggregate 24 out of the last 60 months before the sale.

The 24 months need not be continuous. For example, you couldlive in your house for a year, rent it out for two years to tenants, and moveback in for another 12 months to qualify.

There is no need to own the home for 60 months. You can qualifyfor this tax break if you bought your principal residence as recently as 24months ago, providing you occupied it as your “main home” for those24 months.

IRC 121 can be used over and over again, without limit, butnot more frequently than once every 24 months. For full details, please consultyour tax adviser.


DEAR BOB: My daughter will be buying a house with herboyfriend (whom she does not plan to marry). How do you recommend they taketitle together? Is joint tenancy a good idea? –Kenneth R.

DEAR KENNETH R.: I’m sure your daughter has her reasons forbuying a house with a guy she doesn’t plan to marry, but I can see endlesscomplications, none of them advantageous.

I do not recommend they hold title as joint tenants withright of survivorship. That means if one of them dies, the survivor owns theentire property. Is that what they really want?

When two co-owners take title together, they usually holdtitle as tenants in common. Then, if one of the tenants in common dies, theirownership share passes according to the terms of their will.

But a big disadvantage of tenant-in-common ownership is ifone co-owner wants to sell but the other doesn’t, one co-owner can bring apartition lawsuit to force a sale of the property.

Better yet, holding title in a partnership allows specifyingterms that should be considered, such as a buy-out agreement, or what happensif one partner can’t pay his/her share of the mortgage payment and otherexpenses. Your daughter should consult a real estate attorney in the communitywhere the property is located to discuss her title choices.

The new Robert Bruss special report, “2007 Realty TaxTips: Eight Chapters of Tax Savings for Homeowners and Realty Investors,”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 Questions for this columnare welcome at either address.

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

Copyright 2007 Inman News

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