DEAR BRUCE: My sister and I inherited a condo from our mother. I have been living in the condo for the last six years. I pay the taxes, maintenance fees and repairs while I live here. Is my sister entitled to rent? The idea is that if I didn’t live here, we’d rent it for maybe $800 and split it. My sister thinks that in addition to all I pay, I should also pay her $400. The other issue is that I’m not working full time. I told her that if mom were alive, she wouldn’t charge me to live here while I’m not working and can’t afford it. That’s the beauty of this gift. Any quick thoughts would be appreciated. — Beau, via email
DEAR BEAU: This is another example of what leaving undivided property can do. It causes nothing but problems. Your sister’s math is flawed. Assume you rented the condo for $800 to someone else. You would then have to pay the taxes, maintenance and repairs out of that $800. That might equal $200. Then we have $600 remaining, and that seems a very high estimate. If we were going to continue that logic, then the $600 would be split two ways, and at the very most you would be responsible to her for half of the $600.
Given the circumstances, unless your sister is hard-pressed, it would seem that she’d be better off requesting that you pay her a couple of hundred dollars a month. On the other hand, if your sister is in dire circumstances, such as yours, I understand why she would want something, but $400 is way too much.
DEAR BRUCE: My husband and I acquired some credit card and loan debt during the last 10 years. We worked hard in the last two years to get most of it eliminated. All but $10,000 is repaid. We recently sold our home and are awaiting the building of our new home. We now have the more than $10,000 needed to repay the credit-card debt. About two years ago, when we were really struggling, I contacted the bank directly and asked them to make the three accounts inactive to bring the interest rate down from 25 percent to 6 percent. We had them automatically deduct the monthly payments of up to $500 a month. This made it possible for us to finally work on minimizing the size of the debt rather than barely pay the interest every month. These accounts have been inactive, but we have been making our regular timely payments. I am curious about what you would suggest doing with the accounts. If we pay these inactive accounts, will it negatively impact our credit?
These three accounts represent our oldest history of credit. The bank said once we pay it off, we may be reconsidered to have them reopened as the original accounts, but I doubt it. Would you suggest we repay most of it but not all? We were pre-approved for this home loan in March. I do not want to do the wrong things and make our credit rating worse before this deal goes through in September. — Kathy, via email
DEAR KATHY: I wouldn’t get too upset about some negative effect to your credit, which may possibly be there already. Have you checked your credit score after making this very attractive negotiation from 25 percent to 6 percent? You mentioned that the bank might reconsider opening your accounts. I think there is a very strong possibility they will do that. You have demonstrated that you are responsible but got in over your head, and you are meeting the responsibilities.
Further, no matter where you have this money invested, you are not getting anything like the 6 percent that you are paying on the loan. Given that circumstance, if you do not need this money to put down on your new home, I would pay off the account. You can apply to the bank for a new credit card. If it isn’t granted, there are lots of folks out there who will be very pleased to open another credit card, even with your somewhat checkered credit history. That business is so highly competitive that many concessions have been and are being made.
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Send your questions to: Smart Money, P.O. Box 2095, Elfers, FL 34680. E-mail to: email@example.com. Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.