Interest rate facts often misrepresented


Question : Some direct mail I've been receiving from mortgage lenders quotes unbelievably low interest rates. How can they do this?

Answer: Very low rates are being offered by lenders and the offers may be legitimate. But there also are an increasing number of promotions going out that misrepresent the facts.

I recently interviewed Greg Brose, supervisor of the Consumer and Environmental Protection Division of a district attorney's office. He reported an increasing number of consumer complaints recently, usually focusing on a miscalculation of mortgage interest rate figures.

"If an exceptionally low mortgage interest rate (APR) is quoted, it would be a good idea for the prospective borrower to investigate the offer carefully," he advised.

The age-old adage holds true here: If it's an offer that looks too good to be true, it probably is.

Reverse mortgage taps into home's equity

What is a reverse mortgage?

Reverse mortgages allow senior homeowners, over age 62, to use the equity in their homes to generate additional monthly income. In some cases, this income continues for the lifetime of the owner.

It's basically an interest-bearing loan, sometimes coupled with an annuity plan. It's secured by the homeowner's equity and is usually paid off from the estate after the death of the owners.

James M. Woodard Copley News Service (James M. Woodard is a syndicated columnist; Send questions Copley News Service, P.O. Box 190, San Diego, Calif.,


Estate complexity governs appraisal

My husband died last year, and I must have the properties we jointly owned appraised for estate value purposes. What process must I follow? Do I have to hire professional appraisers?

ANSWER: The process you should follow depends on the complexity of your holdings and your willingness to play it straight with the IRS.

In most cases, our experts say, taxpayers can get away with valuing their real estate holdings through a written list of recently sold comparable properties in the neighborhood. You may have a friendly real estate broker who will perform this service for you free of charge; if not, you can purchase such a list from a qualified broker.

However, if your holdings are in any way complicated, you migh need the services of a certified appraiser. You will pay for this, but the alternative could be an IRS hassle that would be equally costly and time-consuming.

The real issue here, our experts say, is the motive behind th appraisal. The higher the appraisal upon the death of the first spouse, the lower the potential taxable gain to the surviving spouse if there is a sale of those properties.

If the Internal Revenue Service believes that, upon the death othe first spouse, the properties have been appraised with this in mind, you can expect questions. However, if you play it straight, you should have clear sailing no matter what method of property appraisal you use.

(Carla Lazzareschi is a syndicated columnist. Write to Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, Calif. 90053.)

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