Q: A number of years ago my parents transferred title to their house to my sister and me with the understanding (not in writing) that they could continue to live there as long as they wished. They paid the real estate taxes, insurance and upkeep.
Now my sister and I are approaching the age (we're in our 60s) when we might face having to pay for our own nursing home care. Although my father died in 1988, my mother continues to live in the house.
What arrangements can we make to avoid having to sell the house to pay nursing home costs if my mother wants to continue to live in the home?
A: It's funny how a small thing like transferring title to a property can have some wide-ranging complications down the line.
Since you and your sister are not married (to each other), it's unlikely you would be forced to sell the home to pay back Medicaid, should either of you need it. However, Medicaid would put a lien on the property for your share or your sister's share of the asset. When the property is sold down the line, the lien would be satisfied.
Your mother would be able to remain in the property as long as she/you can afford to pay the expenses and maintenance or as long as the arrangement is still working for all of you.
You should really speak to an elder care attorney or estate attorney who might have other ideas for you.
Q: I have 26 years left on a 30-year fixed-rate mortgage that was originally $232,000 at 5.625 percent. Does it make sense for me to refinance? When might it make sense to do so?
A: If you can save money now (when you're not that far into your 30-year mortgage), you should look at refinancing soon, especially if you can pay off your closing costs with the savings in less than a year.
My guess is that it won't make much sense for you to refinance until interest rates fall below 5 percent, maybe 4.75 percent or 4.5 percent for a 30-year fixed-rate loan. (Those are the interest rates you'll get if you have enough equity in your property and if you have great credit.)
But if you do refinance, consider this your last loan for awhile. If you stay in your home until the mortgage has been paid off, you should save a tremendous amount of cash over the years.
One more thing to consider: If you're sure you'll live in the home for at least the next seven years, you might want to consider buying down the interest rate on your loan.
While some lenders have raised fees to refinance a loan, the pricing structure they may have could allow you to pay up to one point (a point is 1 percent of the loan amount) to buy down the rate of your loan one-half or three-quarters of a point. That small difference may help you a lot down the line.
But you have to be committed to living in the home for a long time, otherwise paying the fees to refinance and paying the points will be a waste of resources.
Q: I heard some information about first-time homebuyers receiving a $7,500 tax break. Can you please inform me, as I am a first-time buyer?
A: If you blinked, you probably missed the $7,500 first-time homebuyer tax credit (10 percent of the purchase price up to $75,000). Good for first-time buyers (defined as someone who has never before purchased a home or who hasn't owned one in three years) who purchase a primary residence from April 2008 through June 2009, the tax credit is a dollar-for-dollar reduction in the taxes you pay, so it's much more valuable than a deduction.
The bad news about the $7,500 tax credit is that it was more like a zero-interest loan because it required that you pay it back in $500 increments over 15 years.
The good news is that Congress has recently decided that everyone who buys should get not just a $7,500 tax credit, but an $8,000 tax credit. And, the repayment requirement has been eliminated as long as you live in your house for at least three years.
The $8,000 tax credit will be good on homes purchased between Jan. 1, 2009 and Nov. 30, 2009.
Q: My wife and I are making an offer soon on a single-family house. Our current townhouse, purchased in 1993 for $137,000, has about $62,000 remaining on the mortgage. We need to decide whether to sell our current home or rent it out. If we rent, it seems as if we would need to sell within three years to maintain the tax break. Given the current economy, is this a worthwhile endeavor?
A: Depending on the housing market where your home is located, you'll probably have better luck renting than selling at the moment. If you can hang onto the property for the next year or two, you'll likely have a better chance of selling at a fair price. So, I vote for renting.
