Best home equity loan rate

Q&A | The right way for siblings to own a

FAMILY VACATION HOME.

My four siblings and I recently inherited a family vacation home from our parents. We want to keep it, but how can five adults own property and handle things such as liability issues? And what happens when one of us dies? --ANN GRIORIAN, Muncie, Ind.

The simplest option, and possibly the best if the property is of modest value, is to take title as tenants in common. You would each own an equal share of the property.

If you go this route, you'll need a written agreement spelling out the nitty-gritty. How much will each of you pay yearly into an account to cover taxes, homeowners insurance, maintenance, furnishings and the like? Who will control the account? If one of you dies, do the rest of you want to buy that person's share? What happens if one of you reneges on contributions? Will everyone have the right to a period of exclusive use? The more you leave up in the air when you enter into the agreement, the more trouble you're asking for later on. You'll need a lawyer to highlight the contingencies you need to plan for and to draw up the agreement. That could cost several hundred dollars.

If you plan to rent the property to outsiders--or if it's worth several hundred thousand dollars or more--consider using a more complex form of ownership such as a family limited partnership or a limited liability company. These are more expensive to set up ($5,000 to $7,000 wouldn't be out of the question), but provide more flexibility and protection from personal liability than a tenancy in common. One of you could be the permanent manager of a family partnership to handle the paperwork, or you could rotate that role.

Q & A | Uncle Sam's help makes a higher-rate new-car loan the best

We need an $18,000 five-year loan to finance our new Toyota Sienna. Should we take an 8% loan from the credit union or use a 9% home-equity loan?

--JIM RODRIGUEZ,

Sacramento, Cal.

The 9% loan is cheaper because interest on home-equity loans is tax-deductible. If you're in the 28% federal tax bracket (with taxable income between $43,850 and $105,950 on a joint return this year), a 9% deductible rate is the same as a 6.5% nondeductible rate. The deduction basically means that Uncle Sam pays 28% of the interest. Although your monthly payments will be slightly higher with the 9% loan-$371 versus $363-the federal tax savings will make the home-equity loan almost $700 cheaper over the long haul.

--KEVIN MCCORMALLY

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