Weigh the risks before cashing in on condo equity

Q My sister and I own a condominium in Florida that has no mortgage. The market value is approximately $100,000. We have it rented for $800 per month. Our monthly condo fees are $160, leaving us $640. I plan to move into the condo later this year. We are both in our 50s and have no other investments and no real retirement savings. Should we take out a mortgage for about 50 percent of the value of the condo and invest the money in some other way?

J.J., via e-mail

A "Unless you can guarantee that you can make enough profits from your investments to substantially surpass the monthly cost of the loan, there is no real advantage in taking out a loan like this," says Ed Slott, a tax expert in Rockville Centre, N.Y. "You could presumably get a tax deduction on the mortgage loan; but you would still be risking your home to beat the market. What happens if you don't?"

Q My father-in-law passed on two years ago at age 95. He lived most of his life around Chicago. But his records disappeared from his apartment before my wife and I moved him to Wyoming toward the end of his life. We think he had a paid-up life insurance policy, but we have no record of it. How can we check this?

G. & G.F., Newcastle, Wy.

A "Unfortunately, there is no national or state database of insurance policies to check against," says John Calagna, a spokesman for MetLife insurance in New York. That means you will have do some sleuthing, he says. Call all major life-insurance firms and talk to customer-service reps. Give them your father's name and where he has lived. Also check with his former employers to see if he had continued a policy after leaving.

Finally, ask his former banks if they retained any of his photocopied checks that might list an insurer, Mr. Calagna says.

Q What are 12b-1 fees, and how are they assessed? Are they really "hidden"?

J.M., Seattle

A 12b-1 fees are expenses mutual-fund companies pass along to shareholders to pay for advertising, and other sales costs. The fees typically range from 0.25 percent of fund assets to 1 percent annually.

Many financial advisers recommend that you avoid such fees, since they reduce a fund's net asset value. To see if a fund charges a 12b-1 fee, check out the prospectus. These fees are only "hidden" if an investor doesn't read the prospectus.

(c) Copyright 2000. The Christian Science Publishing Society

Share this story:

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK