Zero Percent Loan Brings Risks, Rewards

|
Posted: Nov 24, 2008 12:01 AM
Zero Percent Loan Brings Risks, Rewards

DEAR BRUCE: I have a second mortgage in the amount of $22,000. I am paying a 9 percent interest, which is $181 a month. I would to like to pay down the loan as soon as possible to get my home equity back. I am thinking in transferring the balance to a credit card with 0 percent interest for a year. Should I do this? -- I.N., via e-mail

DEAR I.N.: Obviously, if you can borrow the money at 0 percent rather than 9 percent, you will save almost $2,000 over that year. The troublesome part: What loan, if any, will be available to you at the end of the 0 percent period? By all means, understand that if you don't adhere absolutely to the terms of the 0 percent loan, you could suddenly be hit with a huge interest bill. If you have discipline to put the money away, and well in advance of the due date, make arrangements on how the remainder of the debt will be paid. I have no problems, but realize that a small slip can be costly.

DEAR BRUCE: How can I get a spouse's name added to a home title? The home was purchased four years ago and has only one name listed. The other spouse had bad credit. In the event of the husband's death, wouldn't this affect the wife? She would have no home, correct? Is there a cost for this procedure? -- B.E., via e-mail

DEAR B.E.: There are a good many variables here. Whether the lender will agree to any change in the title, given the spouse's problems, is an open question. At the time of purchase, they would only give credit for the husband's reputation, income and assets. Whether it's a good idea to put her name on it is another matter.

In the event of the husband's death, her situation would not necessarily be affected. In his will, he could leave his equity in the home to his wife. She would be responsible for retiring the mortgage, but she would not be homeless. However, if she's responsible for a number of debts, leaving the home to her might not be a good idea. While she couldn't be thrown out of the house, she also couldn't sell it until the obligations were retired. Perhaps a trust could be set up under the aegis of a child of this union who has reached majority age and is trustworthy. I would run all of these possibilities past an attorney immediately before anything is done. Death can come at anytime to any of us.

DEAR BRUCE: My husband has passed away and had a few credit cards in his name alone. Do I have to pay them off? It has been almost two years since his passing, and I am over all these bills. What should I do? -- Lynn, via e-mail

DEAR LYNN: If your name was not on the accounts, the obligations were your husband's. However, if he left an estate -- bank accounts, money in checking accounts, real estate, etc. -- it would be obliged to pay them. Two years notwithstanding, the obligations still exist. I take it you were executrix of his estate. Was there any money, or did he die broke? If he left assets, you should talk to an attorney. These bills will have to be settled. They may, however, be negotiable.