Pay­ing down mort­gage a good idea for this cou­ple

Daily Local News (West Chester, PA) - - BUSINESS - By Bruce Wil­liams Smart Money

DEAR BRUCE: » My hus­band is 66 years old and still runs a very small busi­ness. I lost my job three years ago. I was 60, so I de­cided to re­tire.

We down­sized, but still have a mort­gage of $70,000. We have an in­vest­ment in that amount (be­sides an an­nu­ity we can’t touch for six more years). I think we should with­draw a cou­ple hun­dred dol­lars a month to put on the prin­ci­pal so we can get this house paid off.

My hus­band only gets So­cial Se­cu­rity, but I get So­cial Se­cu­rity and a $700 pen­sion. That is why my hus­band is still work­ing.

What are your thoughts on this? A mort­gage for 30 years or take from this in­vest­ment and get it paid off? -- K.H. DEAR K.H.: » You have $70,000 stashed away, but you didn’t tell me how much it’s earn­ing. That is the most im­por­tant piece of in­for­ma­tion.

If it’s a re­cent in­vest­ment, my guess it’s earn­ing hardly any­thing. If that’s the case, un­less you have a real bar­gain for your mort­gage, I would re­tire the mort­gage. The chances are there is a 2 per­cent to 3 per­cent spread there (be­tween the cost of the mort­gage and the in­vest­ment’s earn­ings), which is a sub­stan­tial amount of money.

If you’re wor­ried about emer­gency money, you can get a cou­ple of de­cent-size credit cards or, if you have to, bor­row it. The idea of main­tain­ing a mort­gage with a counter in­vest­ment that is very likely not earn­ing as much as you’re pay­ing doesn’t make sense. Given the choice of a mort­gage or switch­ing in­vest­ments, you know which way I am vot­ing.

DEAR BRUCE: » My mother is 91 years old and owns two con­dos. To avoid hav­ing to pro­bate her will, is it rea­son­able to have her sign quit claims and be­come joint owner of each condo with one of her chil­dren? Her el­derly prop­erty tax is about $600, and the other sim­i­lar condo’s is about $2,700. -- A.H. DEAR A.H.: » Given your mother’s ad­vanced years, and you haven’t men­tioned need­ing the money for the con­dos, I would let them re­main in her name and, upon her demise, have the con­dos left to you or your sib­lings. That way, there will be ab­so­lutely no tax be­cause she could have up to $10 mil­lion plus in her es­tate, if han­dled cor­rectly. If you change this and put them in an­other name now, there will be a sub­stan­tial gift tax, which is no ad­van­tage if you’re still go­ing to hang onto the con­dos.

Send ques­tions to bruce@brucewil­liams.com. Ques­tions of gen­eral in­ter­est will be an­swered in fu­ture col­umns. Ow­ing to the vol­ume of mail, per­sonal replies can­not be pro­vided. The Bruce Wil­liams Ra­dio Show can now be heard 24/7 via iTunes and at www.taera­dio.com. It is also avail­able at www. brucewil­liams.com.

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