Selling a house that's paid off

Q. Our house is paid for and on the market. We want to buy a new home. Should we pay cash for the new home or get a mortgage and bank some of the money? We are both retired and have a income of only $35,000 per year. We also have a little over $100,000 in stocks. What do you recommend? A. Good for you for paying off that mortgage. Do you know how many Americans would have refinanced six times by now or have three mortgages on one property? Now you've got a real asset that is going to give you options. Exploring those options often requires the help of a professional. Sandra Salter of American Express Financial Advisors offered the following recommendations: Do not liquidate your $100,000 in stocks for the purchase of the new home. Use your current income to pay your new mortgage, if you can swing it. Since you are retired, Salter warns you may need the $100,000 for additional retirement income at some point down the line to cover unexpected costs of living increases, medical expenses or home repairs. Not knowing how big your new house will be, she suggests you consider using the proceeds from the sale of your existing home for a large down payment on the new home purchase. That way you can have a lower mortgage payment. Putting your nest egg into a new house is a good idea. Salter also recommends you consult your accountant or tax adviser on the tax implications of the real estate transaction to make sure you don't take an IRS hit. You won't pay any capital gains unless your profit exceeds $500,000, but if it does, you'll have less cash to play around with.

Q. My mortgage company and I have been going back and forth over a payment they claim they never received. I have faxed them the canceled check, but they now say I am in default of my loan. What can I do?

A. Sadly, your story is not unusual. Although predatory lending receives the lion's share of attention, a large percentage of consumer complaints over loans involve servicing, not origination, according to a study conducted by Kurt Eggert, an associate professor of law and director of clinical education at Chapman University School of Law in Orange, Calif.

Fortunately, the Real Estate Settlement Procedures Act (RESPA), enforced by the Department of Housing and Urban Development, is on your side.

If you have a dispute with the servicer of your mortgage, pursue it in writing.

Be sure to include your account number and clearly explain why you believe your account is incorrect.

Within 20 business days of receiving your inquiry, the servicer must send you a written response acknowledging it. Within 60 business days, the servicer must either correct your account or determine that it is accurate.

Your servicer must send you a written notice of the action it took and why, along with the name and telephone number of someone you can contact for additional assistance.

You can file a complaint under the RESPA regulations. Write: Office of RESPA and Interstate Land Sales, Department of Housing and Urban Development, 451 Seventh Street SW, Room 9146, Washington, D.C. 20410.

You can also file a complaint with the Federal Trade Commission. To file a complaint or to get free information on consumer issues, visit www.ftc.gov or call, toll-free, 877-FTC-HELP (877-382-4357).

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.