I want to refinance my mortgage, but I’m about to turn 70. Is it wise to refinance at my time of life?

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Dear Marketwatch,

I hope you can help me find out. I am 69 years old and will be 70 at the end of the month. I have been offered a cash out refinance loan and need to decide whether to take a 15- or 30-year loan. My monthly obligation will obviously be higher for a 15 year loan.

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I can’t – unlikely – either live long enough to make payments, or even make ends meet the remaining 11 years on my current mortgage for that matter. I have diabetes, let alone other diseases. The mortgage lender knows my age, but the choice is mine.

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Normally I think one’s heir would have to deal with it on the basis of a will, but in my opinion I have no heir. I am single, I have never been married and have no children. My mother has passed away and my father is 97 years old. He lives with a woman, but they decide not to marry.

My brother and I have been separated since 1990. I don’t intend to give her anything valuable – when our mother died it outweighed me, other than the fact that I really don’t have much value. I don’t want to leave any trouble for him. He is 67 years old, and who knows whether he will live on when I die. Then there’s my niece, his only child, whom I barely know. He has never attempted to correct that fact since he was an adult. She is 38 years old, unmarried and has no children. I have 33 or more second cousins, but almost no relationships for 30 years that I have ever met.

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My hurt and resentment about my brother and niece should not negate my obligation to leave a will. After all, they are my blood, and I am not emotionally attached to any nonprofit. I have close friends whom I met from 1954 to early 1966, but no significant others.

Meanwhile, I owe about $33,000 on my current mortgage. I’m asking for $30,000 in cash, which I want to use for home improvements. Appraisals are waived, but similar sized units in my condo have sold for between $285,000 and $315,000. I live in a suburb of Los Angeles. The current monthly payment including property taxes is $458 with an interest rate of 5.25%. The new payout is $531 at 3.28%. Not a big difference on what the current Refi rates are according to all the ads, but my debt-to-income ratio is no bueno.

,‘Who is stuck with the dues when I die? Does the lender accept it?’,

Currently my only “real” income is Social Security and $900 my dad sends me monthly from a trust account. I intend to go back to work next year because I am bored out of my mind, but that has nothing to do with the debt. The amortized 30-year loan payment will include the remaining mortgage and cash in addition to closing costs, prepaid taxes, and over $17,000 in outstanding debt.

When I die, who gets stuck with the dues? Does the lender accept it? Does one face any problems, or does not receive the balance if it is sold? Am I right that it is irrelevant if I take a loan of 15 years or 30 years as I may die before paying off either of them?

Since the intended loan is much less than the value of the house, are there other kinds of problems that my heir will have to deal with? Of course, there could be another earthquake, but except for some unforeseen calamity, or having my dues in payment, if I don’t leave a will can I be legally compelled to handle any issues?

Sincerely,

Golden Girl Refinance

‘The Big Move’ is a Businesshala column looking at the ins and outs of real estate, from navigating a new home search to applying for a mortgage.

Do you have questions about buying or selling a home? Do you want to know where your next move should be? Email Jacob Passi at [email protected]

Dear Refinance,

I’d like to start by addressing your question about loan term length, as I’m concerned you may be understanding the difference between a 15-year loan and a 30-year loan.

You know the monthly payment for a 15-year loan is high—it’s true. But it may be more than you realize (unless the lender has already pointed out the difference.) For example, for a $100,000, 30-year mortgage with an interest rate of 3%, the monthly payment would be about $422. If the same loan had a term of 15 years instead, the monthly payment would be about $691.

To underscore, the monthly payment on a 15-year mortgage is about 64% higher. Often, people are attracted to a 15-year loan for a shorter tenure as it saves them on interest in the long run. But for a person with a fixed income, this difference in monthly payments can make a huge difference.

,Monthly payments on a 15-year loan are about 64% higher than on a 30-year loan.,

As you said yourself, it’s not clear that you’ll live long enough to see the loan repaid either way. So the long term savings brought in by the short term will most likely not be worth it. You are now dependent on your father’s financial support, but will it continue after his death? If not, then again, the high monthly payment from a 15-year loan could suddenly become completely unrecoverable.

Whoever gets the home when you die, it doesn’t matter whether the mortgage had a 15- or 30-year term to resolve the debt. In fact, our housing loans must still be paid off when we die.

In your case, it seems that you either have no will or have not specified who will inherit your assets upon your death. Most states follow a process to determine who is eligible for an inheritance, starting with spouses and children, followed by grandchildren. In cases where none of those persons are around, the state will consider other relatives, including siblings, nieces and nephews. The state can also inherit property.

If you die without a will and the state does not determine a rightful heir to the property, in theory your mortgage lender or servicer will foreclose on the home to cover the debt. If an heir was identified, or you named one, most states have laws in place to protect their rights at home. When you die, your heirs will inherit the title to the house, but not its mortgage. Mortgages often include a pay-for-sale clause that requires the loan to be paid off when the home is sold — because that’s when the title is transferred.

When the title transfer is through an inheritance, the laws usually protect the heir. They can pledge and continue to make payments. In some cases, they may transfer the mortgage to their name, or they may sell the home to pay off the loan and pocket the remaining proceeds later.

,Feel free to think about more than just blood relatives when considering heirs.,

If I go a little further, I would advise you to reconsider who is eligible to receive your inheritance. By nature, most of us think of leaving our worldly possessions to blood relatives – but in my view, the definition of family is much broader than that. Your brother hurt you, and you say that you have no relationship with your niece.

It seems that you have many friends with whom you have a rich relationship. Sure, they may not be romantic in nature, but I am sure that these friends will bring joy and comfort to your life. These people are your chosen family, and they deserve every right and privilege usually reserved for blood relations. In fact, you can give your property to a friend instead of a family member.

Your friends may not be interested in inheriting your condo, but I would talk to them to see what they would think of such a gift. They may have a child themselves or other relatives who could benefit from inheriting a home to live in (or the financial value of that property.)

You have worked hard to maintain your home, and you should feel comfortable knowing that after you pass away it will go to someone you care about. Tell anyone you know of as your successor about your plans. That way it won’t come as a shock to your demise, and they can feel well equipped to handle the various tasks that come with inheritance.

By emailing your questions, you agree to publish them anonymously on Businesshala. By submitting your story to Dow Jones & Company, the publisher of Businesshala, you understand and agree that we may use your story, or versions thereof, across all media and platforms, including through third parties.,

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