On homes and real estate: Holding a mortgage
Q. I have someone who has asked me to be their mortgagor, and I was wondering, how does one go about the paperwork? Are there standard forms to be used? How does one file the mortgage lien? Would a real estate attorney be advisable or necessary? I have the wherewithal and based on current equity markets and savings rates, this looks like a better income rate. Advice?
A. When you lend the money, you’re not the mortgagor. You’d be the mortgagee, the one who receives and holds the mortgage. The mortgagor is the borrower, the one who does the mortgaging, pledging the real estate as security for the loan.
Yes, a mortgage can be a good fixed-income investment, but you always have to wonder why this borrower isn’t getting an institutional mortgage instead of coming to you. Do you really want to lend money to someone who may have been rejected by banks as a poor risk?
To protect yourself, take the same precautions institutional lenders do. First, make sure a decent down payment is involved, or equity if we’re talking about a refinance. You want the borrower to have sufficient money tied up in the property so there’s never a temptation just to walk away. And you need some assurance that if it ever came to a foreclosure auction, there’d be enough value to get your money back.
Then, before you’re committed to anything, analyze the borrower’s credit record, other debts and income (perhaps with the help of your own CPA .) Do they pay their other bills on time? And — as banks do — you should certainly have your own lawyer draw up the documents and take care of putting them on record. Holding a mortgage is too big an investment to risk making do-it-yourself mistakes.
Q. I have been living with someone for 10 years. I own the house and pay the majority of the repairs. A few years ago, we put on an addition, which I paid for. He pays half the mortgage and the cable, phone, etc.
He thinks that if we sell, he is entitled to half the profit. I think everything is mine.
A. If you are the sole owner, you are legally entitled to all the proceeds from a sale.
Q. My significant other passed away just before Christmas. 0ur house deed is in both our names but the loan is only in his. I called the Bar Association and a real estate lawyer said my best bet was to just keep paying the mortgage, since I probably wouldn’t qualify for a loan on my own. Do you agree? Also, what if I decided to sell? I am halfway through a 30-year mortgage.
A. Lenders don’t usually call in a mortgage loan when property is inherited, so yes, keep on paying. But are you sure you inherited the other half of the ownership? The answer may depend on how your deed was worded, whether your partner left a will and what family members he had. If you haven’t settled that question, get back to the lawyer. If you are indeed full owner (the confusing legal term is “owner in severalty”), you shouldn’t have any complications in selling.
Ÿ Edith Lank will respond to questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (include a stamped return envelope), or readers may email her through askedith.com.
© 2012, Creators Syndicate Inc.