Process in place to remove old, outdated lien

Q. I have a tough question that even the county head of deeds could not answer. Here we go.My husband and I bought my childhood home from my mother in 1990. We went through a lawyer, but he never did a deed search. The problem is that the old mortgage is still a lien on the house, although nobody owes money anymore. My father died in 1982 and the insurance paid the loan off in full, but nobody recorded this at the deeds records. Apparently, my mother was sent an important document saying it had been paid off, but she doesn't know where it is.When we went for a home-equity loan, the bank said no since there is already a lien on the house. The original mortgage company went out of business and so did the next three companies. The paperwork is in limbo. Could you help me get this settled? I don't want to sell, but it sure would be nice to clear up this mess.A. Your situation shows why it's important, when a mortgage is paid off, to make sure the county's public records show the debt has been satisfied. Of course, it would have been easier and less expensive to follow through in 1982. The law still provides a relatively simple process, though, for clearing that cloud from your title. You're wise to set the record straight before you might need to do it in a hurry. Consult a lawyer, preferably one who specializes in real estate, about starting an action to quiet title.Q. My father-in-law passed away in September 2009. He had a modest home and not many other assets. My wife now has the house on the market. What are the income tax consequences for us upon the sale of the house? And what form is used to report the sale, if necessary?A. The cost basis for inherited property is its value at the time of death or within the next six months. You probably won't owe any tax if you sell for about that amount. The sale is reported on your tax return at Schedule D, Capital Gains and Losses.Q. Your advice to the 27-year-old single nurse - who wanted to know where to start when looking for her first home - was to visit real estate offices and contact mortgage brokers. Although excellent advice, it wasn't the first thing that came to my mind to tell her. I would have advised her to start saving for the 20 percent down payment if she hasn't already.A. Yes, yours is also good advice. These days, though, more buyers than ever are opting for FHA-insured mortgages, which require no more than 3.5 percent down.Q. When I purchased my home in 2002, our conventional mortgage required Private Mortgage Insurance because we did not put down 20 percent. Our equity is now more than 22 percent of the original purchase price of our home. I have requested that the bank remove the PMI, but they are telling me that I have to pay for an appraisal in order to remove it. I don't know if it should make a difference, but our mortgage was also sold to another lender because our original lender is no longer in business.Is the PMI determined by the original purchase price or the current value? What do I need to do? Who should I contact to correct this situation?A. The rules for dropping mortgage insurance vary with different types of loans. For most, the decision is based on either original value at the time of purchase or current appraisal, whichever is lower. Sorry about that.Q. I want to sell my property to the tenant, but her credit is not good. How does rent with the option to buy actually work? I can't purchase another home until I get rid of that one.A. A rent-with-option contract won't get your house sold any time in the near future - if at all. The option provision means that while you're bound to sell, your tenant can choose to buy or not to buy.The arrangement would give your tenant credit for part of her rent each month toward the purchase price. That's assuming, again, that she eventually decides to buy and is financially able to go through with it.I wouldn't recommend doing this if you are looking for a prompt sale. You could end up with your house tied up for the long term - in a contract that might never go anywhere.bull; Edith Lank will respond to questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (please include a stamped return envelope), or readers may e-mail her at ehlank@aol.com.2010, Creators Syndicate Inc.