Paying down mortgage a good idea for this couple
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.
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