Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, May 10, 1993 TAG: 9305100010
SECTION: MONEY PAGE: 6 EDITION: METRO
SOURCE: Mag Poff
DATELINE: LENGTH: Medium
My options are:
A 7 3/4 percent loan for 15 years on $53,000 with costs of only $350 total but with principal and interest of $522.43 a month;
Or a 7 1/4 percent loan with no origination fee and no points with 2 1/2 to 3 percent closing costs.
I am also considering keeping my present mortgage and paying double or triple principal payments to save interest.
Which option would offer me the most savings?
A: Michael Hincker, manager of the Roanoke office of Mortgage Service America, questioned some of your figures.
If you take the higher rate so that the lender pays closing costs, he said, you should not pay $522.43. He said a 15-year loan of $53,000 at 7 3/4 percent should cost you $498.88 a month for principal and interest.
If you take the 7 1/4 percent loan and finance the closing costs, Hincker said, you would have a loan of $54,325 which, at 15 years, should cost $495.91 monthly.
That means you face a difference of only $3 a month between the two options.
He questioned your figure for the costs, however. He said they should be only $1,000 or 2 percent of your loan unless other items are in there.
If you pay the closing costs up front on the loan of 7 1/4 percent, he said, your payments would be $483.81. With the saving of $15.06 a month, it would take you eight years to recover the up-front expense of refinancing.
If it were his option, Hincker said, he would take the 7 1/4 percent mortgage and finance the closing costs.
Update will to cover son
Q: My husband and I are in our late 40s, so hopefully we have many years left. We have one child together, who is now age 12. My husband also has another son, in his 20s, by a previous marriage.
If anything would happen to my husband, would our home and bank accounts all go to me, or would his first son inherit part ownership? We built our home after we were married. We both had a will drawn up about 14 years ago, after our marriage, leaving everything to each other. I worry that maybe the laws have changed and the wills would not be valid.
A: The laws on inheritance have changed in the last 14 years but, if anything, they are more favorable to surviving spouses. Your wills should still be valid.
Most couples also own their home as tenants by entirety rather than as tenants in common. The latter term means that each of the partners owns half the property. But tenants by entirety each own all of the property. If you have such an arrangement, the entire house would automatically become the property of the surviving spouse.
As a general proposition, joint bank accounts pass outside a will to the surviving owner although this could become a more difficult point.
But something you have that is more important than money is your 12-year-old son.
All wills should be updated periodically to keep up with changing circumstances. It is especially urgent when there is a major life change such as a marriage, divorce or birth of a child.
What would happen to your estate and to your young son if you and your husband should die together in a single accident?
What do your existing wills say about such an event? What happens to the money if both of you are gone? Who would have custody of your minor son?
In such an event, your son would be at the mercy of a court. Your husband's grown son might share equally with your mutual child, even though the 12-year-old has greater needs. If you lingered for a little while longer than your husband, the older son might be cut out completely if your will is silent on this subject.
For the sake of your son, you and your husband should update your wills to provide for his guardianship and to cover the outlay of your estate if both of you are killed.
Correction
In answer to a question last week, it was erroneously stated that closely-held companies are treated differently from public companies when shares purchased at different times are sold. In both cases, stockholders can, if they do it at the time of sale, designate which shares are sold.
Mag Poff will help find answers to your personal finance questions. Send them to her at the Roanoke Times & World-News, P.O. Box 2491, Roanoke, Va. 24010.
by CNB