On homes and real estate: Lenders disclose different interest rates

Posted10/8/2011 12:01 AM

Q. I notice how many mortgage companies mention an interest rate and then an APR a bit higher. How is this annual percentage rate calculated? Is it simple or is it a computer calculation? Which rate would I really pay?

A. Let's say you take out a loan for which you'll be paying 4.5 percent interest every year. But the lender also requires a bit of extra interest, just once, at the beginning. If he wants you to pay an extra 2 percent of the loan up front, you're being charged two "points." In all, you're really paying slightly more than 4.5 percent.

How much more? As you suspected, a computer is the best tool for calculating the true "annual percentage rate." Federal law requires it to be disclosed, so you can compare different loan offerings. In practice, it mostly just confuses people. See the following letter.

Q. I don't understand "points." Is it just when you get a mortgage, or do you earn more every year as you make payments?

A. Sorry. Interest points won't do a thing toward free airline tickets.

Q. Our house has been listed for sale since March at the price the broker recommended. Only two people have come to see our house and neither made an offer.

Should we list with another broker? What conclusions should we draw from our experience thus far?

A. Simple. Your price is too high. No matter what other problems are present, the right price will cure them. It's more important to change price than to change brokers.

Your broker may have made a careful estimate of possible market value, but it is just an estimate. The buying public is the best judge, and they have told you the price is not attractive. You could hold the agent at fault, however, if you received no advice about dropping your price.

Q. I want to put my home into a living trust so my three daughters can avoid probate upon my death. Can you tell me how to word the document?

A. Don't do anything without consulting a lawyer who specializes in estate planning. Just about every move of that sort can have unexpected consequences that must be considered before you act.

Q. My husband and his uncle were left a house by his grandmother. The uncle never discussed taxes, upkeep or anything else, and the house remained vacant. Recently, his daughter and her boyfriend have moved in without asking my husband.

Now his uncle is offering to buy my husband's share for half of the assessed value of the house, but the uncle gave my husband an itemized list of taxes paid since 2003 -- along with lawn care, water and gas bills.

Can the uncle make my husband pay back taxes that the uncle wrote off every year and upkeep that he never contacted my husband about? Basically, he wants to buy my husband out for next to nothing so that he can rent to his daughter and, as the market goes up, make money on the house.

Back in 2006, my husband offered to live in the house and pay taxes, and his uncle said he would let us live there for $1,000 a month. We bought a house instead.

We're at a point where we don't even care about breaking family ties because of the greed he has shown with the house.

A. Three different things are going on here.

First off, if your husband is co-owner, then he is legally responsible for the property taxes. That's true even if he never received any bills. His uncle has a right to be reimbursed for your husband's share. If they hadn't been paid, the place would have been sold for back taxes, and your husband would own nothing now.

If his cousin does live there, your husband is entitled to receive half the going rent in that neighborhood. The uncle evidently thinks $1,000 would be a fair figure. But, of course, your husband would need to pay his share of the usual landlord expenses.

And finally: Using the tax assessment to set market value is a poor idea. Each co-owner could hire an appraiser, then average the two appraisals. The buyout price could be half that, minus your husband's share of past property taxes -- and a fair share of upkeep expenses. Perhaps they can reach some compromise on those.

You don't want the expense of lawyers for a family disagreement like this one. It might be a good case for professional mediation. Look in the yellow pages.

• 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.

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