Dear Liz: My mother passed away unexpectedly in late 2008. She had a mortgage, and the house was under her name only. She didn’t leave a will. My family is still paying the loan, and the company does not know my mother passed away. We don’t have a lot of money and we need advice on how to get the house under my sister’s name (she has good credit). We need to get the loan modified since the monthly payment is almost $1,000 and only about $70 goes toward the principal.
Answer: Your mother may not have created a will, but your state has laws that determine what was supposed to happen after her death. Lying to the mortgage lender is not one of the legal options.
Federal law allows mortgages to be transferred to heirs. (Without a will, those heirs usually would include a surviving spouse and the dead person’s children.) Transfers because of death typically are exempt from the due-on-sale or acceleration clauses that otherwise would allow the lender to demand full payment.
To get the mortgage transferred, however, you usually need to have started the probate process.
At this point, you should consult a mortgage broker about the likelihood of getting a refinance or a loan modification. If the home is deeply underwater, it may not be possible or worth the effort. If foreclosure is likely, it would be better not to transfer the mortgage as the heirs’ credit would suffer significant damage.
If your plan is feasible, however, then you’ll need to consult a probate attorney. You may not have a lot of money, but you need to pool what you have to hire someone who can dig you out of this mess.
Dear Liz: After reading your column about the best ways to pay while traveling in Europe, I want to share my experience. I was unhappy with the foreign transaction fee charged on my Citibank credit card, so on my next trip to Europe I primarily used my Capital One card. Imagine my disappointment to find that Capital One’s currency conversion formula was much less favorable to me than Citibank’s.
Answer: Credit card expert Odysseas Papadimitriou suspects you were comparing purchases made on different days, or even on different trips. Although one of your cards charges a foreign transaction fee and the other doesn’t, both cards get the most favorable rate from their card network’s exchange rate. Visa cards would get the Visa card network exchange rate, while MasterCard would get the MasterCard network exchange rate. If both your cards were Visas, for example, they would get the same exchange rate, but the one that charged the foreign transaction fee would increase your cost by that amount (typically 1% to 3%).
There may be “tiny” differences between those Visa and MasterCard exchange rates on a given day, but one wouldn’t be “much less favorable” than the other, Papadimitriou said.
And the exchange rates are certainly better than what you’d get by exchanging dollars for euros at a bank in advance of your trip, or by using currency exchange services once you got there.
So the fact remains that the cheapest way to convert currency is to do so automatically by making purchases with a credit or debit card that doesn’t charge foreign transaction fees. Here’s another suggestion for reducing fees abroad:
Dear Liz: One option for folks traveling to Europe to save money on ATM withdrawals is to check with their bank and find out if there is a checking or savings account that carries the benefit of the bank canceling foreign ATM fees as well as their own fees. Before I traveled to Scotland to visit my daughter, I switched accounts at my bank to one where there are no fees for using other banks’ ATMs. Worked brilliantly!
Answer: If your own bank doesn’t offer this option, it may be worth setting up a checking account with a bank that does. As mentioned in the previous column, Charles Schwab’s high-yield checking account offers unlimited ATM fee rebates worldwide with no foreign transaction fees, and Capital One 360, the online bank, waives ATM fees and absorbs MasterCard’s 1% foreign transaction fee. USAA Bank charges a 1% foreign transaction fee but doesn’t charge a fee for the first 10 ATM withdrawals.
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Dear Liz: My in-laws just informed us that they have gone through their retirement fund and soon won’t be able to pay their mortgage. They borrowed against the house they’ve lived in for 30 years and currently owe $325,000. They are devastated, so I am trying to figure out the best way for them to stay in their house in their final years, as they are both 73. They have about $300,000 in equity but do not want to sell. They are willing to sell the house to my wife and me at their current balance. We would make the payments and they remain in the house. When they pass, the house would be ours. They looked into a reverse mortgage but this would cover only the payments, not taxes, insurance or maintenance. What is the best way to do this? Do I get a loan and purchase outright? Do I contact their bank and see if I can assume their loan? Do they quit-claim the home to my wife and me? My wife and I can afford to do this, but we want to make the right financial decision.
Answer: Before you do anything, please consult a tax professional and an attorney with experience in estate and elder law.
It’s unlikely the lender will allow you to assume the loan, so you probably would need to set this up as a sale of the home with you and your wife obtaining a new mortgage.
But their plan to sell the house to you at a below-market value could create gift tax issues and could delay their eligibility for Medicaid, should they need help paying for nursing home care.
There are other risks to your in-laws. Your creditors could come after the home if you lose a lawsuit, for example. You could sell the home without their consent, and you would have a claim on the property if you and your wife split up.
Then there are the risks to you. You say you can afford to make the payments (and presumably pay the taxes, insurance and maintenance as well), but what happens if you lose a job or suffer another financial setback?
All of you need to understand the risks involved, and your alternatives, before proceeding.
A sale of the home or a reverse mortgage may well prove to be a better choice. A reverse mortgage wouldn’t completely eliminate their home costs, but would substantially lower them — whoever winds up paying the bill.
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