Paying extra won’t shave time off mortgage
By BOB JEFFRIES
Q: I have a 30-year Adjustable Rate Mortgage (ARM) with 22 years left. I have read that by paying extra money each month, I can shave years off my mortgage. Will this work for me?
A: Extra payments only shorten the length of fixed-rate mortgages. When an arm is adjusted, a new schedule is drawn up that accounts for the new interest rate and outstanding balance. The time on the mortgage stays the same. If you have made extra principle payments, you will owe less on the loan and interest, which will reduce required monthly payments.
Home seller’s tax breaks
Q: My ex-wife has stayed in our home and will sell it when our youngest child turns 18. I moved out several years ago. Will I owe capital gains on my share of the profit?
A: The capital gain tax exclusion on the sale of principal residence applies to anyone owning or occupying the home two of the five years prior to the sale. Under a special rule, if your ex has stayed in the house and qualifies for the home sellers exclusion, then you can use the $250,000 exclusion for your share of the gain, even if it is no longer your primary residence.
Signed over the house
Q: I signed over the house to my ex-wife. Now I am having problems applying for a new mortgage, a car loan and a new line of credit because the old mortgage is still on my credit record as a debt. What can I do?
A: The mortgage doesn’t care who owns the house (especially in this housing foreclosure/recession), only who signed the commitment to repay the loan.
When the two of you obtained the mortgage, you each became personally liable for the whole debt. Even if your divorce decree says that your spouse will pay off the mortgage, banks that weren’t party to your divorce settlement don’t have to obey divorce decrees. Only the lending institutions relieve a borrower of liability. Sometimes it will, if the remaining owner can prove that he/she can carry the payments on his own.
Reverse mortgage
Q: I am having trouble paying my bills on my retirement income. Should I consider a reverse mortgage?
A: I have gotten several e-mails and letters concerning this. Normally I say talk to a specialist in Reverse Mortgages. However, reverse mortgages, meant for seniors (age 62 or older) whose houses are paid off or nearly so, are loans that need not be paid back until the owner sells the house or dies. Drawback: You may not get to leave house to heirs.
You can get a regularly monthly check, a lump sum or a credit line. The debt builds up gradually with interest.
Order the free booklet:
A Consumer’s Guide to Reverse Mortgages from AARP
Fulfillment, EEO 1537, D15601,
601 E St. NW, Washington, DC 20049
www.aarp.org/revmort. Or get information at www.reversemortgage.org
Balloon Mortgages
Payments are set low enough so you can afford them. The remaining principle- which can be high- is due at the end of the term, say 15 years.
If you don’t have the money then, you could lose your home. Start worrying about that deadline in the thirteenth year, at which point you should refinance with a conventional mortgage.
Until then, keep borrowing low and pay debts on time to ensure good credit when it’s time to refinance. I hope everyone celebrated Veterans Day. I did because I am a Veteran-Yea!!
Have a real estate question? Write, call, fax or e-mail:
Bob Jeffries, Realtor
Century 21 Birchwood Realty, Inc.
4040 Del Prado Blvd., Cape Coral, FL 33904
239-540-6659 Office • 239-542-7760 Fax