Personal Finance Q & A

Not too late to refinance maturing mortgage

Q We have a 30-year mortgage with nine years left until maturity. The interest rate is 10.25 percent (ouch!) and the monthly payment is $385. The remaining balance is about $27,000. Do costs involved in refinancing a mortgage under this situation offset the amount saved by obtaining a lower interest rate?

-P.R., via e-mail

A "Ouch" is right, says Joann Scanlon, a senior vice president with Burgdorf ERA Realtors, in Murray Hill, N.J.

With mortgage rates now running about 7 percent in many areas, you could probably shave some dollars off your monthly tab through refinancing.

"There are now many programs available that require no payment of [refinancing] points," she says.

Ms. Scanlon suggests you call Cendant Mortgage Services at 1-800-236-3268. They can show you what type of mortgage plan might work best for you, depending on your tax bracket, the length of the term you require, and the amount to be financed.

"With rates now so low, you probably could offset refinancing costs," a Cendant spokeswoman says.

Q In a recent column you wrote that an individual can make a tax-free gift to any person of up to $10,000 annually, or $20,000 if a husband and wife gives the gift. But what if the amount is more than that, say $30,000. Who, if anyone, pays the tax?

-G.N., New York

A In years when you make a gift exceeding the allowed annual limits, you must file tax form 709, which can be downloaded from the IRS at www.irs.gov.

But this does not necessarily mean you will owe anything. Instead, the amount over the limit would be subtracted from your unified estate and gift tax exemption.

The exemption amount for tax year 1998 is $625,000. It rises to $650,000 in tax year 1999. By 2006 it will reach $1 million.

No tax would be due until you have exceeded the total value of this exemption, and would be paid either by you, as gift giver, or in event of your passing, by your estate, says tax expert Ed Slott in Rockville Centre, N.Y.

Questions about finances? Write:

Guy Halverson

The Christian Science Monitor

500 Fifth Ave., Suite 1845

New York, NY 10110

E-mail: halversong@csps.com