[an error occurred while processing this directive] On money
© St. Petersburg Times, published March 30, 2003
Low interest rates are great for those of us who have been able to get a new mortgage or refinance an old one. But unfortunately, one group of credit-worthy homeowners has missed out on the refinancing boom. If you've whittled your mortgage down to a small balance that's close to being paid off, refinancing doesn't make sense because the costs would outweigh the benefits. You appear to be stuck paying 7 or 8 percent interest in a 5 or 6 percent world.
Now here comes a once-unthinkable alternative to the rescue: You may be able to pay off your mortgage with your credit card.
No, I'm not kidding.
Take a closer look at those credit card offers flowing into your mailbox. If you have great credit, you may be getting offers for fixed-rate loans at less than 6 percent interest for balance transfers or debt incurred by use of the handy enclosed "convenience checks." If your available credit is as big as your mortgage balance, your solution could be in hand.
Of course, credit card interest is not tax-deductible. However, many people with small mortgages no longer pay enough interest to make itemizing worthwhile. If you don't itemize, mortgage interest is not deductible either.
As with any offer, it's very important to read the fine print and scrupulously comply with all the rules and restrictions. The offer I recently received from First USA specified that my fixed rate would last until my balance was paid off, unless I made a late payment, in which case my rate would go up. It also said my payments might be applied entirely to the low-interest rate balance instead of being used to offset other charges that would carry a higher interest rate.
To take full advantage of a special deal like this one, pay your card's balance in full before writing a convenience check. Then stash the card safely away so you won't be tempted to use it for any new charges. It is also important to keep making the same payments you did on your old mortgage. Otherwise, your smaller payments will extend the payoff period and cost you more interest in the long run.
There usually is a fee for use of convenience checks (up to $50 on the offer I got), but it is far less than the cost of refinancing.
An alternative method for paying off a small mortgage balance is to take out a home equity loan or a home equity credit line, preferably one with no closing costs. Credit lines are the cheapest alternative right now, but interest rates float, so your payments could increase.
Q. A friend recently advised me to make my bank and brokerage accounts "payable on death" accounts. He said that after my death, my beneficiaries will simply need to take identification and a copy of my death certificate to the institution to withdraw the balance and close the account, thus avoiding probate and taxes. I cannot understand how this would be possible or that the IRS would not somehow collect taxes.
Using this type of account avoids probate but does not reduce or avoid income or estate taxes. The IRS would consider these accounts part of your estate and could go after your beneficiaries if your estate's other assets were insufficient to meet your tax obligations.
Payable on death accounts are a good tool for simple estates, particularly those with a single beneficiary. The more beneficiaries you have, the more complicated things become. Naming different beneficiaries for different accounts may unintentionally produce hard feelings. Accounts that are fairly equal in value at the time you set them up may not be equal or even in existence when you die.
Q. Why is the Janus Strategic Value Fund no longer included in the Times' mutual fund listings? Things like this scare me as I have a few of those shares.
The Strategic Value Fund and the Special Situations Fund merged to become the Janus Special Equity Fund, effective Feb. 28.
When a mutual fund that previously appeared in newspaper listings suddenly disappears, it usually is because it merged with another fund, changed its name or both. This happens regularly. For example, Waddell and Reed funds are being renamed Ivy Funds and some of the funds in the Ivy Fund lineup are merging with existing Waddell and Reed Funds.
Your best source for this kind of information is the mutual fund company itself. It's no reason to panic.
-- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.