Jewish World Review Dec. 20, 1999 /11 Teves, 5760
Capital gains tax sometimes best
DEAR BRUCE: My mother, who is 70 years old, owns a piece of property that she inherited when her parents passed away. She is now considering selling it, but does not want to pay a high capital gains tax. What should she do? -- S.M., via e-mail
DEAR S.M.: Unfortunately, there are taxes on gains and they have to be paid. If your mother is to keep the property in her name and pass it on as a legacy, the house would then come to today's stepped-up value. This wouldn't help your mother very much. Another possible plan would be to take out a mortgage on the property. Then, when she passes away, it could be sold at the stepped-up value. But the most logical thing to do would be to sell it for the highest price possible, pay the taxes and let her enjoy the use of the money.
DEAR BRUCE: We just bought a new home with a $130,500 mortgage at a fixed interest rate of 6.63 percent. We plan to pay extra money every month. Can you show us how much we would save in interest by giving different examples? -- T.T., Idaho Falls, Idaho
DEAR T.T.: I think that you are making a huge mistake. Where in the world are you going to find 6.63-percent money? It is a bargain rate, and shouldn't be paid off one hour early.
Whatever money you can afford over the regular mortgage payment should be invested in the financial markets -- possibly real estate or some other investment vehicle. Paying off a cheap mortgage in advance is just not a good move. Bear this in mind: Out-performing 6.63 percent in today's market should be a cakewalk.
DEAR BRUCE: My husband is retired, but I am still working. Our mortgage payments are $730 a month, and we have 17 years left to pay on them. We would like to investigate the possibility of a reverse mortgage. Can you tell me what is involved? -- P.M., via e-mail
DEAR P.M.: Unfortunately, you are not eligible for a reverse mortgage. A reverse mortgage can only be obtained against a property that is free and clear from other debt. While there are several options for reverse mortgages, until such time that you own the property without a mortgage on it, this option is not available to
Send your questions to JWR contributor Bruce Williams by clicking here. (Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.) Interested in buying or selling a house? Let Bruce Williams' "House Smart" be your guide. (Sales of the book help fund JWR).
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