A reverse mortage on a home not yet paid off
Q: Can I get a reverse mortgage if I still owe on my mortgage? I have a balance of $65,000, at 7 percent interest. The house would sell for about $135,000. What interest rate goes along with a reverse mortgage?
M.P., Phoenix
A: You may have trouble getting a reverse mortgage since you owe so much on your home. Although one banker we talked to thought you might eke out some money, the decision ultimately depends on a loan officer's assessment.
A reverse mortgage would give you a loan determined by a formula used by a reverse lender. (The loan, given to you in a lump sum or installments, becomes due when you cease to occupy the home.) But in order to get a reverse mortgage, the loan must exceed the outstanding balance on your mortgage. Once the mortgage is paid off, you can use any
remaining dollars made available to you. The retirement group AARP has a calculator online (
www.rmaarp.com) that can help you determine if you qualify.
As for interest rates on reverse mortgages, they vary by region. In your area, the money you don't use immediately will earn roughly 4 percent in the bank. But you will owe about 3.5 percent on any money you do use.
Q: The Monitor ran a laudatory column on bonds Nov. 19. If I buy corporate bonds, what ratings should I use in terms of safety?
G.M., New York
A: According to the "Everything Investing Book" (Adams Media Corp.), check out ratings through such services as Moody's, Standard & Poor's, Duff and Phelps, or Fitch. Look for corporate bonds rated BBB, or Bbb, or higher. Ratings tell you about the veracity of the issuer. They don't protect against market losses.
Q: I have been a participant in Enron's excellent direct-investor program (a DRIP plan). Will it be continued if Enron is merged into another company, as now seems likely? Can I keep making monthly payments into the plan?
Name withheld, Los Angeles
A: According to a spokeswoman for Enron's shareholder-services department, "you can continue to make payments into the plan."
Whether the program continues after a takeover is a decision that will be made by the new company, she says. Dynegy, which is the front-runner to acquire Enron, also has a DRIP.
• Questions about finances?
Write: Guy Halverson, The Christian Science Monitor, 500 Fifth Ave., Suite 1845, New York, NY 10110. E-mail:
halversong@csps.com
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