From the ArcaMax Publishing, Edith Lank Newsletter:
http://www.arcamax.com/news/edithlank/s-374728-609105
Dear Edith: Awhile back you had someone ask you about reverse
mortgages. I lost the article; therefore, would you please let me know
how to attempt the process of getting a reverse mortgage. I will be 62
on December 26 of this year. Does your credit standing have to be
excellent or will a person with fair credit be acceptable? Also, right
now I have a payment agreement with my mortgage company until a year
from July.
My balance owing on the property is approximately $32,000. Do you have
enough information to give me the details needed to proceed? In
addition, just exactly how does a reverse mortgage work? -- D.H.
Answer: You don't need to prove credit or even income to place a
reverse mortgage, because you won't make any payments as long as you
live in the house. You remain the owner of the property, just as with
any other mortgage.
When you move out or die, everything you've received -- plus closing
costs and interest -- must be paid back, usually by the sale of the
house. If you live a long time and borrow more than the house is
worth, mortgage insurance takes care of the shortfall.
It's possible to use the reverse mortgage to pay off your existing
loan, and then receive regular monthly checks, building up that debt
against your home. The amount you can borrow is based on the value of
your home and life expectancy. At only 62, when you could be expected
to live and collect payments for a long time, you would be offered
less than if you were older. But, if your house is worth a lot,
perhaps there would be enough to relieve you of your present mortgage
for a start.
You can find a great deal of information at the web site
www.reversemortgage.org. There, you can calculate just how much you
would be allowed to borrow.
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BPO
Dear Edith: What is meant by a BPO? -- via e-mail
Answer: I don't suppose you're asking about the Buffalo Philharmonic
Orchestra, so the acronym probably refers to a Broker's Price Opinion.
That would be an experienced local broker's written estimate of
probable market value. It's less detailed and less expensive than a
full appraisal. It might be required, for example, with a homeowner's
request to drop private mortgage insurance coverage.
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Rent To Buy
Dear Edith: Exactly what is entailed in buying a house when you want
to rent with the intention of buying? I asked someone and they seemed
to think it was too complicated. I believe this is the only way I can
get a house right now. Is this a bad way to go and if so, why? -- K.
Answer: Two different arrangements are possible.
A lease-option allows you to move in as tenants with the right to buy
the property later at a specific price, if you want to. You're not
obligated to buy. Sometimes you pay a non-refundable deposit in return
for the option. Sometimes part of the rent goes toward your down
payment if you do buy. In most cases you'd still have to qualify
financially for a mortgage loan, sooner or later. If you couldn't, you
would remain as ordinary tenants under the lease.
A land contract allows you to move in and be obligated to buy on a
sort of layaway installment plan. The seller acts as your bank,
collecting the money monthly. Sometimes the place is then deeded to
you partway through the payment schedule, if everything is going well.
You and the property owner can negotiate whatever arrangement suits
both of you. Every contract is different. You're right in thinking
these are complicated documents. You must involve your own real estate
lawyer to make sure your interests are protected, before you sign
anything.
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Buildable Lot
Ms. Lank: What is considered a buildable lot? -- S.D.
Answer: The definition varies from one place to another depending on
local regulations. Before a lot can be okayed for construction, it
must usually be of at least a certain size with a specific amount of
road frontage. If no sewerage is available, it probably needs to pass
a percolation test showing it can support a septic system. Zoning or
subdivision requirements may be involved.
To find out the details in any particular area, contact the local
government's building bureau.
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Sold A Rental
Dear Edith: I just sold my rental income house. A year from now I
shall have to pay capital gains. Where can I put this money so I
cannot pay so much in capital gains? -- S.N.
Answer: At this point the IRS doesn't care what you do with the
proceeds from your sale. It won't make any difference in your capital
gains tax.
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Edith Lank will respond personally to any questions sent to her at
240 Hemingway Drive, Rochester, NY 14620 (please include a stamped
return envelope), or readers may e-mail her at ehlank@aol.com.