From the ArcaMax Publishing, Edith Lank Newsletter:
http://www.arcamax.com/news/edithlank/s-403463-883261
Dear Ms. Lank: I have a mortgage with a balance of $54,000 with a rate
of 6.5 percent. This is a 15-year fixed rate. Awhile back a friend
said that if you have a 30-year mortgage, by making one extra payment
per year, the loan would be reduced to 22 years. Two extra payments in
the same year would reduce it to 15 years. Is there a way for me to
reduce my mortgage balance using the same principle? Just curious, I
would like to pay it off but my loan officer evades my questions. --
D.
Answer: Any time you send in an extra dollar, in a separate check
clearly marked "to be applied entirely to principal," you are
borrowing one dollar less from then on, and you save $6.50 in interest
every year. It's like making a fixed-rate risk-free investment,
guaranteed 6.5 percent return.
Then, if you keep on making the same monthly payments, every year
there will be an extra $6.50 that can go to reducing the principal
even faster. The benefit compounds.
Yes, with a fixed-rate loan, making extra payments will reduce the
time remaining. (An adjustable rate mortgage would still go to the
very end but adjustments would be for lower payments than they would
have been otherwise.)
With either type of loan, you'd save on interest overall, because
you'd be borrowing less than originally planned.
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Note And Mortgage
Dear Edith: What is the difference between a mortgage and a note? Is
it possible to be on a mortgage but not on the note? If the house goes
into foreclosure would I be responsible for the money owed if I'm not
on the note? -- Via e-mail
Answer: When you sign the note you're making a personal promise to
repay the loan. When you sign the mortgage you're saying "and if I
don't do that, you can have my house sold to get your money back."
If you're not on the note, you're not personally liable. You might
lose the house if you didn't make payments, but they couldn't come
after you for any shortfall.
There's a catch, though: I don't think a lender will give you the
money in the first place if you aren't willing to take responsibility
for the debt. In rare situations, buyers take over an existing
mortgage without assuming the loan personally. For normal mortgage
lending, though, borrowers must sign both documents.
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Selling Brother's Business
Dear Edith: My brother has a well-established business that he would
like to sell. I have had my real estate license for three years now
but have never listed any commercial property. My real estate office
claims to handle all types of real estate transactions but they have
no commercial properties listed.
My brother told me he is going to list his business with an
experienced commercial broker. I am somewhat upset. My brother also
doesn't want to list his business with my company because he is afraid
that word would get out that his business is for sale as my company is
local. Your advice would be appreciated. -- L.
Answer: Doing business within a family is a delicate matter. Look how
you're already feeling "somewhat upset." Don't risk your family's
harmony. Your brother will be better off with a company that's
experienced in commercial sales. Problems are sure to arise before
it's all settled, and you'll be glad you stayed out of it.
----
House Isn't Selling
Dear Edith: Our house has been on the market four months with no
offers. We have lowered the price as far as we can. Our agent has only
had two open houses. We are so disappointed in how things have gone
and frustrated in knowing there is not much we can do.
We signed a six-month contract with her and would LOVE to be out of
it. -- Via e-mail
Answer: Frankly, open houses don't often result in sales. They're
useful mainly to show the seller something is happening, and to let
the agent meet potential clients and customers.
If your house is multiple-listed, so that lots of people know about
it, then the buying public is simply voting that you're asking too
much. It's no use basing your price on "as far as we can go." Buyers
aren't interested in your needs, but in their own. If something
similar is on the market for less, of course they say to their agents
"take me to that one."
You always have the right to withdraw from an agency. Your listing
contract is with the company, not with the particular salesperson, so
you'd want to discuss the matter with the managing broker in that
office.
But in the end -- changing agents wouldn't make up for an asking price
that doesn't attract attention. Anything will sell if the price is
right
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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.