The Cincinnati Post

DEAR BRUCE: My husband and I are looking into a reverse mortgage. I am 62 and he is older. We have an outstanding mortgage of $175,000, and the house is estimated to be worth about $539,000. To do this in both names, due to my age, payments will be low and we will have to come up with $180,000 to satisfy the outstanding mortgage and loan costs. Our only savings are $50,000 and our income is less than $3,000 a month. Is this the right thing for us to do? -- M.K., via e-mail

DEAR M.K.: My reply will not make you happy. You're telling me that you are living in a home worth $540,000 with an outstanding mortgage of $175,000 and only $36,000 a year income. You are living way over your head. A reverse mortgage is not the solution here. The appropriate solution would be to sell the home, pay off the mortgage and live in a much smaller home. I understand this means relocation, possibly even dislocation, but the reality is that on your income and very modest savings, you simply cannot afford to live in a half-million-dollar-plus home, and you most surely cannot afford a $175,000 mortgage.

DEAR BRUCE: My retired husband and I are 50 and 62. He has an investment plan that he cannot add onto. We own our home and have no outstanding debt. We recently received $500,000 and cannot agree on what we should do with it. I want to put a portion, maybe $100,000, somewhere that will increase its value substantially within 10 to 15 years with low or no risk. We would both like to put the remainder somewhere that we could get to if we could get to it while still earning as much interest as we can. Do you have any suggestions? -- J.G., via e-mail

DEAR J.G.: You guys are very fortunate, but you ask an impossible question. You want to invest 100 big ones that will increase substantially in value with low risk or no risk. A contradiction. You want to put the remainder where you can get at it but earning as much interest as possible. Again, difficult but not impossible. You can put the $400,000 in government bonds where there is absolutely no risk in terms of principal as long as you hold them to maturity. If you choose to sell the bonds during the maturation process, they could very well sell at a discount. "No risk," effectively means "no reward." That is the reality in today's world. You mentioned that you are 50 and 62. You certainly have plenty of time, and it would seem to me that a balanced portfolio would be the wise way to go. Bear in mind that no matter how balanced and how carefully chosen, you can go into the tank or make a lot of money.

DEAR BRUCE: My mother, 82, had heart surgery last March. Her poor health requires her to be in a nursing home. So far, Medicaid has covered her stay, but her time is running out and soon she will have to pay. Her home is in a land trust, but her cash and assets are worth about $75,000. Is there any way to shelter this money for her in case she gets better over time or will the government take it all? -- Reader, via e-mail

DEAR READER: It's a little late to lock this barn door. You mentioned that your mother's home is in a land trust. I'm not quite sure what that means but this may be out of her hands and insulated from the Medicaid authorities. The cash assets are vulnerable. If you were to withdraw this money and the Medicaid authorities in your state were to learn of this asset, they most surely would be derelict in their obligations if they didn't go after it. The idea of welfare (and that's what Medicaid is) is to not kick in until the individual's assets have been depleted. There is truth in what you say, she might need this at some later date. Unfortunately, the system demands that people who can afford to pay for their care, do so until their assets are exhausted.

Mortgage Rates News, Mortgage News, Financial News