Q & A with Dottie Herman

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Q1 - My home is currently on the market for sale. I have lived here for a number of years and I have a very high mortgage interest rate. My home has already been on the market for a while and I do not believe it will sell in the next few months as there are a lot of homes for sale in my community. Should I, and can I, refinance while my home is for sale? Is this a wise decision?

A - You should look into a refinance to lower your payments. If you only plan to remain in the house for a short- term period, say less than 3 years, you can utilize a short- term adjustable rate loan which has rates in the 3.5% range right now, so your monthly payment would decrease significantly. One thing to consider is that the banks do have rules around refinancing houses that are on the market, so you will need to take it off the market and may even need to wait a month or two after to apply for your refinance. Check with a few lenders in your area to determine what is available.

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Q2 - I just inherited a large sum of money. I am wondering if I should pay the mortgage off on my current residence or continue to make payments? Is there a pro or con to either scenario?

A - Paying down your mortgage will always benefit you since you may lower your payment, the term of the loan, or both, depending on the specifics of your loan.  But the biggest advantage is that you are reducing your interest rate cost for the loan.  So, if you can afford to pay down your mortgage there is no reason not to. The one aspect that may be worth looking at is the tax advantage of the interest deduction, so check that with your tax advisor to make sure.

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Q3 - I just sold my home- due to some financial issues we owe more on the home than the sale price. Do we pay the bank the rest of the money? Do we take care of this at closing? We had two mortgages and were beginning to default on our payments. We just want to make sure there are no issues at the closing table.

A - When you owe more than the value of your home you cannot sell it without the involvement of your lender.  This is called a "Short Sale" and the deficiency can be handled in a few different ways: the bank may forgive it, or you could have to sign a note with them to pay the differencet back over time. In today's environment many banks, at the governments urging, are absorbing the loss and allowing homeowners to move on. If you are pursuing a sale you need to call your lender and explain the situation to them. It is also recommended that you hire an Attorney or Real Estate agent knowledgeable in short sales to assist you. 

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Q4 - My wife and I are going to relocate to Florida due to my husband's job relocation. I am wondering when I should put my current home up for sale in relation to starting to look for a new home. We can afford to buy a second home, but I would prefer to sell my current residence first.

A - Spring is a very active time in the real estate market place and listing your property now will give you a large pool of buyers from which to draw. You will need to do some research on-line to ascertain the price points of current comparable listings in your neighborhood. Enlisting the services of a local real estate professional can be helpful to get your property on the market. It is advisable for you to research properties in the region to which you are moving. If your move is job related, it is important for you to find out if the employer is contributing to any of your moving costs. Should you find a qualified buyer quickly, you may choose to negotiate a Closing date that coincides with your move.

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If you have a real estate question for Dottie, please send it to; Reporters@WorldPropertyChannel.com

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