House Calls: Consult a CPA
If he were to wait to inherit the house, the mortgage could again remain with it, even if he doesn't qualify. As an heir, he would receive a new -- probably higher -- cost basis for the house according to the home's value at the time of your death or soon thereafter. That might make a difference in capital gains tax were he to ever sell the property.
In any event, if and when he takes title to the house, the mortgage can remain with it, and the interest rate won't change.
Dear Edith: I have a question about a reverse mortgage. My husband and I are both in our early 70s and are planning on selling our four-bedroom home. We would like to buy a one-story townhouse, as stairs have become increasingly difficult for my husband. It has been suggested that we consider a reverse mortgage for our new home.
I would appreciate your thoughts on the positives and negatives of a reverse mortgage. -- K. H.
Answer: For some seniors, a reverse mortgage is a fine resource. You'll have to figure out for yourselves whether it's appropriate.
With a reverse mortgage, homeowners don't make monthly mortgage payments. Instead, they receive monthly checks from a converted portion of the home's equity. There's no magic involved: A gradual debt (with interest) builds up against the property, but it doesn't have to be repaid as long as either spouse remains in the house. This plan started as help for seniors who needed more income but didn't want to sell their paid-up (or nearly paid-up) homes.
Beyond showing that they can manage property taxes and insurance, homeowners don't need to prove income or credit, because the debt needn't be repaid until the house is sold someday.
Instead of receiving monthly checks, homeowners can choose to receive a lump sum, set up a line of credit or -- as in your case -- use a reverse mortgage to buy a new home.
The money you receive is not taxable because it'll be repaid some day. The borrower must be at least 62 years old; a spouse or partner could be younger.
Over the years, the Federal Housing Authority has gotten rid of expensive scams and reduced the fees and interest rates on reverse mortgages. You would pay for FHA insurance so that if the eventual sale of the house were to not bring enough to cover the accumulated debt, the shortfall will be covered. Or if your kids wanted to keep the property, they could eventually buy it at a small discount.
Contact Edith Lank at www.askedith.com, at email@example.com or at 240 Hemingway Drive, Rochester NY 14620.Copyright 2017 Creators Syndicate Inc.