Mortgage Fees to Avoid

DEAR PATRICIA: If you will be receiving only a 5 percent interest in the property, that means you will probably want to hold title as a tenant in common with your husband, who will retain a 95 percent interest. Each of you needs valid written wills to pass your interests upon the death of either of you to whomever you each designate.

Your husband can convey a 5 percent interest in the house to you by a recorded quitclaim deed. The deed should include a legal description of the property, the percent interest transferred to you, the official parcel number, the method of holding title, and his notarized signature so the deed can be recorded. Consult a lawyer for details.

DEAR BOB: My parents divorced in 1995. The judge gave the house to my mom but she had to either sell it or keep it and refinance the mortgage. She wanted to keep the house, but she couldn't refinance because her debt-to-income ratio was too high. My mother gave me a quitclaim deed, signing the house over to me, and I helped her refinance with a new mortgage. Now I want to get my name off the title and put my mother back as sole owner, as she desires. If I do that and my mother dies, am I responsible for the mortgage payments although I don't hold title? What do I need to do to quitclaim the house title back to my mom? Do I need to go through a title company? -- David P.

DEAR DAVID: If you are now on the title alone, you can sign a quitclaim deed to your mother. However, you will still remain liable to make sure the mortgage payments are made even when you don't hold title to the property. When your mother dies, the title to the house then goes to whomever she names in her will or revocable living trust.

You don't need to go through a title company to quitclaim your title to your mother. Consult a lawyer for details.

DEAR BOB: Our next-door neighbor is about 65 and retired. He is divorced and lives alone in his house. In 1995, he and his then-wife bought the house for $220,000. Today, it is worth about $650,000. The ex-wife is asking that he now sell the house and pay off its $187,000 mortgage to get her name off the mortgage so she can receive her half of the profit. He doesn't want to sell the house and move. He is a wonderful neighbor, and my wife and I trust him completely. We are willing to use our liquid assets to help him stay in his house. We are thinking of buying the house from him for cash and then selling the house back to him. Or perhaps we can loan him the money to pay off the mortgage and buy out his wife's share, with him getting a home equity line of credit to pay us back. -- Ashley S.

DEAR ASHLEY: If your neighbor can qualify to get a home equity line of credit for the amount needed to buy out his ex-wife and pay off the existing mortgage, let him do it on his own. There's no sense in you getting involved in a potentially messy situation. If he can't qualify for a new mortgage, perhaps you can buy the house and rent it back to him. That would give you the rental property tax benefits, and he and his ex-wife can each claim their $250,000 principal residence sale tax exemption up to $500,000 total. For more details, consult a tax adviser.

DEAR BOB: I recently attended a motivational real estate conference at a fancy hotel with a free lunch and a well-known ex-NFL quarterback as the special guest. The speaker claims investing in tax lien certificates will return a yield of 16 to 36 percent from counties across the United States. The price for his seminar package is $4,285, but he offered it at a discount price of $2,495. I smelled a shark so I didn't jump in the water, but many people bought the seminar. Are tax lien certificates really this lucrative? -- Ken Y.

DEAR KEN: Congratulations for not spending the $2,495 for that tax lien course. Tax lien certificates can be profitable investments, but you've got to know what you're doing if you want to avoid losing money. An excellent book on this topic is "Profit by Investing in Tax Liens" by Larry B. Loftis (Kaplan Publishing, 2004). And it costs less than $20.

DEAR BOB: My husband and I are in our seventies and have lived in our home for 48 years. Our three children are in their forties. Our will stipulates the house will go to the three upon our death. However, because one unmarried daughter living at home has been on disability for the past 25 years, we wonder if that is a good idea. If her brother and sister want their financial share of the house, the disabled daughter would not have the money to buy their shares. Nor would she have a place to live. We want to show compassion and yet be fair. Our children are kind, sincere and loving of each other. Wanting their share of the money would be based on need, not greed. What should we do? -- Mary Jane T.

DEAR MARY JANE: That is a difficult situation with no right or wrong answer. If I were in your circumstance, I would probably leave the house to the disabled daughter alone. Or you could leave it to all three siblings equally, but with a life estate in the house for your daughter as long as she lives in it. Either way, your disabled daughter will have a place to live. I presume the house is mortgage free so making mortgage payments is not an issue.

DEAR BOB: I have heard that some people can have a custom home constructed by a builder and, after construction is completed, have 50 to 60 percent equity in the new house. Is this true, and how can I go about doing this? -- Greg H.

DEAR GREG: Hire a quality custom-home builder who charges low construction prices. If you already own a building lot, that gives you a head start. There is no guaranteed way to turn a fast profit on new custom homes unless you can lock in a low construction price and market values rise during the construction period.

DEAR BOB: How does a reverse mortgage work? Who owns the home -- the person buying out the mortgage or the homeowner? -- David P.

DEAR DAVID: If all owners of a principal residence are 62 or older, and there is no or a small existing mortgage balance, the reverse mortgage lender pays the senior citizen homeowner either monthly lifetime income, a lump sum or a credit line (except in Texas). It's the homeowner's choice which alternative or combination is preferred.

The homeowner continues to own the home, subject to the reverse mortgage, which does not require any repayment until the homeowner sells the residence, moves out for longer than 12 months or dies.

Then the reverse mortgage matures and must be paid off, including principal and accrued interest. The remaining equity goes to the homeowner or the heirs.

Readers with questions should write Robert J. Bruss at 251 Park Rd., Burlingame, Calif. 94010, or contact him via his Web page,http://www.bobbruss.com.

2006Inman News Service