Dear Michael: My mortgage is set up in a way to where the payments increase after 5 years. I had no idea that this was the type of loan I signed up for. My payments are set to increase from $1,500 to $2,200 per month. I just lost my job and cannot make the new payments. I would sell my home but I owe more on it then what it is worth. Can you please explain my options?
Answer: The type of loan you are referring to is called an adjustable rate mortgage. An adjustable mortgage is a mortgage loan where the interest rate on the note is periodically adjusted after the fix rate expires. The rate is based on a variety of indices. Consequently, payments made by the borrower may change over time with the changing interest rate (alternatively, the term of the loan may change). Other forms of mortgage loan include the interest only mortgage: the fixed rate mortgage, the negative amortization mortgage, and the balloon payment mortgage. Adjustable rates transfer part of the interest rate risk from the lender to the borrower. The borrower benefits if the interest rate falls but loses if the interest rate increases. It is unfortunate that you were not told at the time of the loan that your payments could increase after 5 years. This type of loans is designated for short term ownership and is usually geared for the more experienced investor. You are a good candidate to apply for loan modification. You are showing good faith by making your current $1,500 payment. If you wish to stay in your home, then contact your lender and start the modification process. You will have to submit documents including proof of job loss and bank statement etc… Stay persistent, this will be a challenging time for you. Loan modification is no easy task!
Dear Michael: We are contemplating renting versus buying a new home, when do you think the market will stabilize and is the right time to purchase a home?
Answer: Timing a real estate market is almost an impossible task. While I do realize that the real estate market is at an all-time high and inventory is low, purchasing a home is still one of the safest long term investment. As a renter, instead of paying down a mortgage you are paying thousands of dollars a year in rent to your landlord. Here are benefit examples of owning a home: Pride of ownership, interest and property tax are tax deductible, equity appreciation, long term positive growth, capital tax exemption if you decide to sell your principle residence of at least 2 years, option to rent out your home and build investment for retirement, remodeling, add or make improvements without having to ask your landlord. To add to it all, current interest rates are at an all-time low.
Dear Michael: We are in escrow on our home. What steps will we need to take to sign over the title of my house to the new buyer?
Answer: A property search will need to be performed as an execution of grant deed which is necessary to sign over the title to a home. The seller needs to choose a title company service to perform a search of the property. The title company will return the results of the title search. This information will be needed in order to prepare the deed. A deed preparation will be submitted by escrow in order for the title insurance company to prepare a grant deed specific to the parties and property involved in the transfer. Most escrow companies will charge a small fee for this. Once the deed is prepared, the grantor (seller) will need to sign and witnessed by a notary public. Once this step is complete, the deed will be filed at the county recorder’s office. A recording fee will also apply. The escrow Co. will be in charge of making sure that all matters are attended too.
Michael Kayem is a Realtor with Re/max Estate Properties serving Culver City and the Westside since 2001. You can contact Michael with your questions at 310-390-3337 or e-mail them to him at: homes@agentmichael.com
