Keep up mortgage payments
Author: Skia
Category: Real Estate
Q: I have a negative-amortization mortgage on a new house in Florida. It is now worth $140,000 less than when I bought it in January 2006. I am losing about $23,400 each year and will have to take out a $60,000 second mortgage to sell or refinance. Should I stop making mortgage payments and allow a foreclosure to occur? I feel that is my only choice.
A: As you knew when you obtained that mortgage, you had a very low monthly payment. The unpaid interest portion of each payment was added to your mortgage balance. The result is you owe more than you originally borrowed.
Just because a property has lost market value after purchase doesn’t mean its owner should walk away. When you bought the property you could afford the payments. That hasn’t changed.
Keep making the mortgage payments as you agreed to do. If you default and stop making payments, your credit will be ruined and you will lose the property by foreclosure.
Q: My wife and I own our condominium mortgage-free. I would like to sell. But my wife has dementia and is unable to sign the condo listing and sales papers. I am able to manage our affairs, but I do not have a power of attorney for her. What would I need to do to sell our condominium?
A: I am sorry to learn about your wife’s dementia. If both of you had placed your major assets, such as your condo, stocks and bonds, and bank accounts into a revocable living trust when she was in good health, then you could sell the condo today as the trustee without the need for her signature now that she is incapacitated.
Since you don’t have a durable power of attorney from your wife or a revocable living trust, the only alternative is to have a court-appointed conservator represent her interests. To have a conservator appointed by the local probate court, you will need to hire a probate attorney.
Q: In May 2008, we will make the final payment on our 30-year mortgage. Is there any advice you can give us because we will no longer have an escrow impound account for homeowners insurance payments and property taxes. What should we expect when we make that final mortgage payment?
A: Congratulations on planning for your final mortgage payment. After you mail that final payment to the lender, be sure to contact the local property tax collector and your insurance agent to have the bills sent directly to you. It will be a big change for you to make those payments directly, as millions of other homeowners do, but I’m sure you can adjust.
After making your final mortgage payment, be sure the lender records either a Satisfaction of Mortgage or a Deed of Reconveyance. Some lenders automatically do this for their borrowers. Other lenders send the notarized document to the borrower and let the borrower record it.
Either way, follow up to be certain this very important document gets recorded with the local recorder of deeds so your property title will be clear of that mortgage.
Q: What do you think of homeowners selling without a real estate agent to save on the sales commission if they are already “upside down” on their mortgage?
A: It’s hard enough for experienced listing agents to sell a home in the current buyer’s market. But owners have virtually no chance of selling without a professional agent in a slow home-sales market.
Worse, when the home seller is “upside down,” meaning the mortgage balance exceeds the home’s market value, there are only two ways to sell that home.
One is for the seller to pay cash at the closing to make up the deficit on the mortgage. This would be done by a conscientious seller who wants to preserve his good credit rating.
The other method is to get the mortgage lender to agree to a short sale for less than the mortgage balance. Some lenders will do this to minimize their loss because a foreclosure sale usually results in a bigger loss than a short-sale loss.
An experienced listing agent is your best hope of getting the mortgage lender to agree to a short sale. The agent can show the lender why a short sale is needed, based on recent sales prices of nearby comparable homes.
To qualify for a short sale, you must be in default because lenders want to be certain you can’t afford the monthly payments. Also, the lender will be sure you won’t receive any money from the short sale.
If your lender agrees to a short sale, please be aware you will receive an IRS Form 1099 showing the amount of mortgage debt forgiveness, which will be taxable income to you on your 2007 returns.
Q: I am in the process of buying a house, using a buyer’s agent. He is asking me to pay a $245 “application fee” to his brokerage. This is on top of the 2.5 percent sales commission the firm will be paid by the home seller. Is this fair? Should I pay an application fee to a broker who is getting more than $9,000 in sales commission?
A: You should not pay a $245 “application fee” (whatever that is) to your buyer agent’s brokerage. A $9,000 sales commission, which you are indirectly paying, is enough.
Real estate brokers should not charge their buyers any extra fees. The sales commission, usually split equally between the listing agent and the buyer’s selling agent, is sufficient.
Unless you signed a buyer’s agency contract agreeing to pay that fee, you are not required to pay. Tell the buyer’s agent to pay that fee from his own pocket if his brokerage insists on charging that unnecessary junk fee.
Source:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/10/14/RE0SSIIQU.DTL
investment property
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