Cash-Poor Widow Has Options

“Few Options for a House-Rich but Cash-Poor Widow” by Jack Guttentag (Your Mortgage, Jan. 27) offers one example of borrowing equity out and investing it with a possible rate of 3%. This scenario, he observes, would run out in about 11 years.

Right now there are a number of fully insured fixed annuities being offered at 6% to 7%, guaranteed for six to 10 years, from very highly rated insurance/financial companies.

If my math is correct, the widow could expect a far larger monthly interest payment for a period of 120 months ($10,500 at 3% versus $24,500 at 7%). About 70% of her principal would remain intact at the 10-year mark of 65.

Her equity in the house might appreciate at 5% annually (a rather conservative estimate these days) tax-free; approximately an additional $1 million in current value equity in 10 years. At that time she would have far more choices available to her and she could look to the marketplace to decide what to do including another refinancing or similar option.

There are other options that may well be better for this woman.

PETER N. KARP

La Costa