ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Sunday, May 19, 1996 TAG: 9605210024
SECTION: HOMES PAGE: D-3 EDITION: METRO
COLUMN: Real estate Q&A
SOURCE: GEORGE KARVEL KNIGHT-RIDDER NEWSPAPERS
Q: I'm being approached by a mortgage consultant about a plan to pay off my mortgage early. He will set up my payments on a biweekly basis, to retire my mortgage in 19 years.
Is the $300 fee justifed for this service?
A: Biweekly mortgage payments require making 26 payments a year, or every two weeks. The amount paid every other week is half of the normal monthly payment. The effect is about the same as making 13 monthly payments a year.
No one needs to use the services of a company to set up biweekly mortgage payments. Homeowners can send in an additional payment each month, along with a regular mortgage payment. All payments in excess of the required monthly payment are used to reduce the mortgage balance.
For example, a $100,000 mortgage at 8 percent interest repaid over 30 years requires a monthly principal and interest payment of $733.80. If you want to pay off the mortgage in 25, 20, 25 or 10 years, the additional monthly payment required is:
25 years, $38.00
20 years, $102.70
15 years, $221.90
10 years, $479.50.
Have an accountant or loan officer calculate the amount of additional monthly payments needed to repay your mortgage in 13, 19 or however many years you wish.
Q: I would like to sell a rental property I own to the renter in a contract for deed. I usually do all my own legal work - quit claim deeds, etc. Could I obtain a contract-for-deed form and complete it myself?
A. You can do it yourself, but I strongly recommend that you get guidance from an attorney in preparing a contract for deed.
I get many letters from buyers and sellers who drafted a contract for deed on a kitchen table. No one writes about success. Each letter is a tale of woe.
A couple of common complaints: ``The buyer sold our home and allowed the new purchaser to assume the contract for deed.'' Without a properly drafted contract, assumption is certainly possible. ``The family who purchased our home is always late paying taxes and insurance. I have to pay and go to court to collect. I not only lose time but must pay legal fees. This isn't fair.'' The contract should address the issue of penalties for delinquent payments and recovery of costs for collection of late payments.
These problems can be avoided in a well-drafted contract for deed. It takes an attorney to write a due-on-sale clause in a contract.
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(George Karvel is professor and holder of the Minnesota Chair in Real Estate at St. Cloud State University, and is a columnist for the Saint Paul Pioneer Press. You can write him at P.O. Box 1760, St. Cloud, Minn. 56302.)
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(c) 1996, Knight-Ridder Newspapers. Distributed by Knight-Ridder/Tribune Information Services.
AP-NY-05-09-96 0646E
LENGTH: Medium: 66 linesby CNB