Filed under: Mortgage Question
Question: If I hold a 2nd mortgage and bank has first mortgage, and if the borrower fails to my 2nd mortgage but may still pays first mortgage, what recourse can I do?? Thanks in advance. You foreclose the mortgage. Once you have a judgment, the clerk of the >court will schedule the property to be sold to pay the judgment. Keep in >mind that it will be sold subject to the first mortgage. In other words, >whoever is the successful bidder will still be responsible to pay the first >mortgage. However, if the first mortgage is for $100K and the second is for >$25K, and it sells on the courthouse steps for $15K, you just took a $10K >beating. Hopefully the property is worth in excess of the two mortgages.
Answer: You foreclose the mortgage. Once you have a judgment, the clerk of the court will schedule the property to be sold to pay the judgment. Keep in mind that it will be sold subject to the first mortgage. In other words, whoever is the successful bidder will still be responsible to pay the first mortgage. However, if the first mortgage is for $100K and the second is for $25K, and it sells on the courthouse steps for $15K, you just took a $10K beating. Hopefully the property is worth in excess of the two mortgages. No, the house is sold with the first mortgage for $15K. In other words the buyer is paying $115K for the house, $100K payable to the owner of the first mortgage (payable in monthly payments as it was before the transaction) and $15K to the owner of the second mortgage. Foreclose or sell your 2nd mortgage to someone like www.easyloan.ca cheers,
January 1, 1970
Question: I am not sure if it is the right group to ask, but I have a question on mortgage program terminology:
What does “7/1 ARM” actually mean? Are these loans based on 30 years for interest and payment calculations? Does 7 mean at the end of the seven years the loan will be due? What does the “1″ mean?
Thanks,
Answer: 7/1 arm means the rate is fixed for 7 years, then it turns into an adjustable rate mortgage that can adjust every year, with a total term of 30 years. 7 years fixed, then adjustable… If you go that route i would recommend refincing before the 7 years and saving some money.
January 1, 1970
Question: I am thinking about doubling my mortgage payments to quickly build equity >in my home. In addition, I want to purchase another home in two years. It >is unlikely that I will have the first one payed off.
My question is simple: Should I save the money in a savings account in >anticipation of the down payment of the second mortgage or should I pour the >extra money into the first mortgage to build equity into the home? Stated >another way, can I use the equity built up in the first home as a down >payment for the second loan?
Answer: If you dump the money into your home it’ll just sit there (it won’t increase the value of the home, it’ll just add equity equal to the amount you dump into it). Yes you can get it back out by taking a second or refinancing, but it’ll cost you in the form of closing costs.
On the other hand, if you put the money in an interest bearing account it’ll earn interest and you can use it to put money down on the second home. The value of your home will still grow. The equity in your home plus the funds in the account will exceed the equity of the former plan due to the interest you get. Of course when you go to purchase the second property you may want to leave it in the account and finance as much of both homes as possible. That would be my choice. I am thinking about doubling my mortgage payments to quickly build equity in my home. In addition, I want to purchase another home in two years. It is unlikely that I will have the first one payed off.
My question is simple: Should I save the money in a savings account in anticipation of the down payment of the second mortgage or should I pour the extra money into the first mortgage to build equity into the home? Stated another way, can I use the equity built up in the first home as a down payment for the second loan?
January 1, 1970
Question: If i sell a commercial property to an individual buyer with 100% VTB first mortgage, what is the consequence if the buyer fails to pay tax or insurance during his ownership while I am the first mortgage holder?
Do mortgage holder liable for any tax due? Is first mortgage ahead of anything including past due tax? Have anyone witnessed or experienced foreclosure by first mortgage holder when the owner fails to have adequate insurance coverage or fails to pay any tax? In what situation, I will lose money?
The property is in Ontario Canada, however it is probably standard in anywhere of Canada or US. I appreciate any reply address any one of the questions.
Answer: An unpaid property tax lien, generally will be superior to any mortgages. It will be your responsibility to make up the taxes to prevent the taxing authority from selling the property for back taxes. If it is sold for back taxes, your mortgage will get wiped out. If you foreclose on the property, you should be able to get the taxes that you have paid and any other expenses you have incurred to preserve the property, included in the final judgment. 1. You really should not consider holding a mortgage on the property if you don’t know this. Property taxes are almost always a first position lien.
2. Never, never, never, never, never hold a 100% mortgage on anything, ever. It gives the buyer absolutely no risk, downside, and you all the headaches.
January 1, 1970
Question: Several years ago (2002), being engaged and wedding plans in place, my girlfriend and I bought a home together. Both names on the mortgage.
And of course, things didn’t work out quite like we had hoped. After six months of BOTH paying the mortgage, I took over all payments due to
some personal situations. We tried to make things work a few times, but long story short- it didn’t.
Now I’m wondering what she is entitled to as far a “buyout”. I don’t think I’ll have a problem qualifying for the mortgage in my name alone.
I’ve made some nice home improvements that I’ve paid for.
We split costs for about the first six months. And in the last 36 months since then, I’ve taken over ALL costs associated with mortgage, insurance, utilities, home improvement projects, etc.
With the increased value of the house, what is a ‘fair buyout’ so I can
move forward and get the house in my name?
Answer: what is purchase price of home? how much was put down? how much was financed? what is the buyout price on loan (estimate principal balance left)
if there was a second mortage taken out, please include all of above for 2nd mortgage too.
the above is the “minimum”. The principal amount paid on the loan should be split 50-50 at minimum.
Then factor in the improvements. From a legal standpoint if you think she’ll challenge you, she may get 50% of the improvements. It might not be fair, but it might happen. Contact a real estate attorney.
at misc.invest.financial-planning there may be some other people which could guide you. Try posting there. First, tell your story to an experienced real estate attorney.
What you can expect has every bit as much to do with your relationship with your ex-girlfriend as it does with the property itself. Whatever might be “fair” is really a matter of agreement between the two of you. If you’re still on good terms, then it might be fairly easy to reach an agreement. If either of you has any thoughts about “getting even” with the other, then it might turn into a big, nasty, expensive fight. Also, even if you’re on good terms now, introducing the idea of settling this property might change the whole dynamic between you.
Your goal should be to acquire a Quitclaim Deed. That is basically a legal statement by one of the parties who shares an ownership interest that they are relinquising that interest. The main issue is the compensation that you will make to your ex for that deed. Also, since there’s a mortgage, if you & your ex are both listed on the mortgage as co-borrowers, you’ll need to refinance.
There are two issues that you need to consider: How much is the property worth, how much is the current payoff on the mortgage, and how much do each of you have invested in it? Whatever equity there is in the property is owned by both of you jointly & needs to be split somehow. What I’d do in such a situation is to calculate the relative shares that each party owns in the equity, proportional to their investment, & make the other party an offer. How easy or difficult you want it to be for her to say “Yes” to your offer is dependent on your personal goals with regard to the matter (as well as hers):
– Do you want to get it all over with, quickly, with the minimum amount of fuss? – Do you want to “stick it to her”, or she to you? – Do you want to try to squeeze every dollar out for yourself?
Each party’s investment should be easy enough to agree on. Each of you should have cancelled checks & other records. Do not count any of what you have paid for in improvements. That money is gone, plus you’re going to be the beneficiary of it anyway, since you’re keeping the house. The value of any improvements is reflected in the value of the property itself anyway, so don’t count it here.
The value of the property may be a sticking point, but must be agreed upon. You can pay for an appraisal (you may need one anyway, to refinance), but you’ll both have to agree in advance to abide by the appraiser’s valuation – or, worst case, order multiple appraisals & choose the best/worst/average. There’s plenty of opportunity for haggling over who gets to pick the appraiser(s), etc. if you’re so inclined.
The agreed-upon value of the property, minus the mortgage payoff, is the equity. You may want so subtract the costs of getting it all done, such as the origination fees, etc. on the new mortgage, appraisal & attorney fees, etc. You may divide what’s left by the ratio of your ex’es investment to yours, & consider that to be a “fair” settlement offer – or at least a point to start negotiations.
What if there is no equity to divide?
What if the ex wants to maintain a share of ownership, in the hope that eventually the value of the property will increase & she will have a share of something that has more value to be taken out?
What if she just wants to be difficult, or has her own attorney that’s more interested in generating billable hours than in getting the whole transation done quickly & easily?
A good attorney will probably find more issues to consider, not to mention knowing how to structure the whole deal to protect your interests & prevent “surprises”, & will be well worth whatever you pay.
January 1, 1970
Question: I’m interested in buying my first home. I’ve used these online mortgage calculators but they don’t seem to take into account other items that might be included in a loan. For example, the tax.
I’d like to know what the bottom line will be with regard to my monthly mortgage payment, based on the purchase price of a home.
So for example, if the price is $170,000, then what would I expect to pay based on a 0.00 downpayment, good credit, a 6.5% rate, a $1500 tax bill rolled into the payment and anything that I may be missing here?
I realize this may be a vague question, but since I’m a first timer, I’m not sure.
Perhaps if someone can point me to a good mortgage calc on the web that takes these variables into account, that would be helpful.
Thanks in advance for your help.
Answer: Nothing else (like taxes) is included in the “loan”. The mortgage calculators usually only calculate your monthly principal & interest payment since those are the only real part of the mortgage itself.
Taxes and insurance are sometimes (often) included in your payment because the mortgage company collects them and pays them so they are sure they get paid.
Just take the tax and insurance amount and divide by 12 and add it to the principal & interest payment.
If your principal & interest payment is $1074.52 per month and your property taxes are $1500/yr and your homeowner’s insurance is (say) $500/yr, then your payment is:
1074.52 + (1500/12) + (500/12) = $1241.19/mo
That payment will increase each year if your property taxes and/or insurance increases (they always seem to…).
I’ve seen mortgage calculators online that allow you to enter these things to calculate a payment.
Are you certain that the taxes are $1500? It could be right, but around here (PA), property taxes on a $170K house would be $3000 – $3500 (including local, county, and school district property taxes). But generally, the taxes and insurance are the only other things included in your monthly payment by the mortgage company, unless you have a homeowner’s association or condo fee.
January 1, 1970
Question: I applied for a mortgage on 7/1 with my bank.
I didn’t qualify for their regular loan so they started the process of a no income verification loan.I’m self emplyed and happen to write off everything I can… I have excellent credit.Just sold my condo,have $300,000 cash in the bank.
new condo will be $155,000 and I’ll be puitting down 100,000.
The banker assured me it looks good–told me last week he should have word from the underwriters by Tuesday.It’s now Thursday…I just called and he said he’s waiting to hear from the processor.
My closing date is set for 8/5/03..I don’t like sitting on the edge like this.How long should this process take ?
Would I be better off just paying cash and taking all my money from that bank ?
Answer: I just heard from my bank yesterday, telling me they are issuing the commitment letter (meaning I got the loan) and my settlement is Aug 5. I applied on May 21!. The hold up was a backlog at the title company.
January 1, 1970
Question: What are the risks of holding a mortgage for a buyer and would you recommend it. Have the opportunity to sell a house for $245,000. Buyer will put down $160,000 cash and pay $4,000 per month for 21 months on the balance of $85,000. Opinions appreciated for protecting yourself to avoid problems if the buyer defaults.
Answer: That may be a good risk. The buyer is putting a substantial interest in the property. I would check with a real estate attorney to see what documents need to be filed to provide you with maximum protection. You may wish to sell the paper to cash yourself out, and pass on any “risks” to the buyer of your mortgage.
MidWest Notes is a primary buyer/dealer of mortgages such as yours. Please contact us if you wish too discuss this further.Did you know that using an owner finance note that is sold at close for cash may be a solid way to facilitate some of your transactions?
January 1, 1970
Question: We had an appraisal done on our house prior to refinancing. But the mortgage broker has turned out to be a flake and we’re switching to someone else. Can we take the old appraisal (which we haven’t even seen yet, though we’ve paid for it) to the new lender, or do we have to get the house appraised again? (We started remodeling right after the original appraisal, and now the house is in construction hell.)
Second: newbie Question: what’s the difference in meaning between the interest rate and the APR? How do we interpret these two items?
Answer: Our lender told us we could use an appraisal for up to a year. If we want to refinance, just use the <12 month appraisal. However, I don’t know if this is the same for your lender seeing it is a different lender than the originator of the original appraiser.
As far as the APR question, jump on any web search engine and look up “Lending Disclosure”. There are dozens of sites that explain very clearly and quickly just what the differences are between APR and the interest rate. You will have your answer in 5 minutes tops.
We just had the same question and obtained the answer this way. I would give you my .02, but I am afraid I could not explain it nearly as thoroughly.
January 1, 1970
Question: Is it normal for a forclosure company to specify clauses such as a “$100/Diem” clause? The counter offer is 64K, pending financing and the $100/day clause if it doesn’t close by January 26, 2004. They lay it out pretty good in the addendum, but seems to me if any thing goes wrong, whether it’s on their end or not I could possibly be out of luck since they are a corporation and I with really no money to spare for legal battles. Plus, $100/day could really hurt.
That clause reads as follows: “Buyer agrees to the $100/day per diem if not closed by 1/26/04 through date of closing provided the delay is not caused by the seller.”
Is this type of clause normal with foreclosure property?
The only other thing I worry about is closing by 1/26/04. They specify the appraisal of the property must be completed in 19 days and loan approval in 21 days. Is it possible to get a bank to move that fast? Is that fast? The bank says they can do it, but everyone is in it for their own cut, not my best interest. I appreciate any thoughts or opinions realizing this is not a substitute for an attorney. I would just like experiences or opinions on the closing date being feasible and if that clause is normal. 
Answer: Yes, it’s SOMEtimes possible to get a bank to move that fast, but it depends on an awful lot of factors, only part of them having to do with you (i.e. how readily accessible is the documentation they’re going to want from you, how clean is your credit report, how straightforward and “ordinary” is your financial situation). Some of them have more to do with the bank (is your loan officer blowing smoke about their turnaround time — which is VERY common, not to say almost typical), is the loan processor too swamped to pay close attention to one individual transaction to keep it on the fast track, is the appraiser they select able to comply with the turnaround time demanded, will they get the loan documents to the escrow or title company [if you're in an escrow state] or attorney at *least* a couple of business days BEFORE the scheduled closing date to give them time to do *their* prep work, overnight documents to the seller to sign *and* get them back in time to record…), some of them having to do with the property (is it going to need additional inspections, above and beyond the appraisal, to satisfy lender? If it does, how long will those take? What if it needs work done to pass reinspection? What if there are clouds on the title that weren’t cleared by the foreclosure?)
And as you seem to realize, the likeliest player to blow the time frame is the lender.
I’ve never seen this done, and have NO idea what your likelihood of success might be in floating the idea… but if I were in your shoes, and the loan officer was swearing to me that s/he could make that deadline, I’d ask for a written agreement specifying that, so long as you provide all requested documentation to the lender within 10 business hours of it being requested from you, the lender will eat the $100/day late closing fee if it comes to that. (Which, in practice, means that the loan officer would eat it out of his/her commission, of course.) Of course this gets a bit more complex because the question could arise as to whether a *fast* loan with, say, above-market interest rate or loan fees, would get them off the hook. If you decide to try going this route, talk with an attorney about feasibility.
January 1, 1970
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