Why Home Loans Are A Better Option Than Credit Cards



Dear Lisa: My husband is 68, I’m 70, we are both retirees and have to pay social security contributions. We have little savings. My husband wants to charge $ 10,000 to a low-interest credit card to pay for a new oven and water heater. He plans to pay the minimum every month and at the end of each year to transfer the balance to another credit card at low interest rates. Is this a good idea?

Answer: Maybe you have better options.

Many credit cards offer low introductory rates that expire after 12 to 21 months, but you usually don’t know before applying for your credit limit.

You may be given a limit that is not high enough to make all of your purchases, or you could use up the limit so badly that it damages your credit score. (The rating formulas depend on how much of your available credit you are using, and ideally you would not use more than about 10 to 30% of your credit limit at any point.) When you transfer your credit to. if you apply for a different low-cost card, you are taking similar risks.

A home equity line of credit or a home equity loan might be a better choice. HELOCs have floating rates, but you would have a source of money that you could tap and pay back as needed (much like a credit card, but backed by the equity in your home). Home loans usually have fixed terms and interest rates so you can borrow what you need and pay off the debt over time (often 15 to 20 years).

If paying back the money was going to be a hardship, a reverse mortgage could be an option. However, reverse mortgages can be complicated and expensive, so speak to a Department of Housing and Urban Development approved housing advisor before proceeding with one.

Storage of will and trust documents

Dear Lisa: You recently advised a person to leave their original will or trust their lawyer. As a practicing attorney, I cannot tell you how many times the original wills and trusts were lost because the attorney who made the documents retired or died before the client. There are requirements for notifying clients of retirement, but unfortunately very few lawyers adhere to these rules. The best thing to do is to buy a home safe or to put the documents in double-sealable freezer bags in your freezer (which should be fireproof and preserve the documents well). Or hire a younger attorney who is still there if you want to change your will or trust, or if you die.

Answer: Thank you for sharing your point of view, but freezers are not fireproof. A fireproof safe would be a better choice for those who want to keep their wills at home.

Unfortunately, there isn’t a perfect will-keeping option. You are absolutely right that often people fail to keep in touch with the lawyers who prepare their documents, even though estate plans should be checked and updated on a regular basis. The risk of losing a will may not be as high when the attorney is part of a large firm, but they too can give up.

Some states allow you to file your will in advance of the probate court or an executor. So this is another way to consider.

Defects of the locker

Dear Lisa: You recently advised against keeping your will in a safe deposit box. That was on the grounds that after death the bank could seal the box. My daughter is on my box (it’s also known as the executrix) – that is, the bank has put her through several hoops, and the result is that she can get access to the box at will. Do your advice hold up in this case?

Answer: Find out about the bank’s policies. When the bank confirms that your daughter has access in the event of death, ask for written assurance.

One problem with keeping items in a safe deposit box is that the contents can be stolen – handed over to the state – if the bank decides the safe deposit box has been abandoned. That usually doesn’t happen if you pay the bill for the box on time and make sure the bank has up-to-date contact information, but it is a good idea to physically check the contents of the box about once a year.

Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet. Questions can be directed to them at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or via the “Contact Us” form at asklizweston.com.



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