DEAR BOB: We purchased our home last November. When signing the closing papers, I noticed for the first time a payment from the lender to our mortgage broker of 1.25 percent of our home equity credit line, which was part of the transaction. I commented to the closing agent, “This looks like a kickback.” He replied, “The only reason it is not illegal is because it was disclosed to you.” I let it go, figuring it was no money out of my pocket and we got a good deal. Several months later, I met an associate with the same lender who discussed my credit line. At that point, I first realized our mortgage broker might have been paid off and it cost us money in the form of a higher interest rate. What is your opinion? – Matt W.
DEAR MATT: If you are paying higher than the so-called prime rate (currently 4.25 percent) on your home equity credit line, you are paying too much. Some home equity credit line lenders even charge one-fourth or one-half percent less than the prime rate.
Purchase Bob Bruss reports online.
The kickback to your mortgage broker is probably legal because it was disclosed to you before you signed the papers. It’s not worth arguing about.
If your home equity credit line interest rate is above today’s prime rate, you should shop around to see if you can cut your borrowing cost to replace your current loan with a better one. However, before you switch (1) be sure the replacement loan has no cost to you and (2) ask your current home equity lender to reduce your interest rate to keep you as a borrower.
REVERSE MORTGAGE NOT AVAILABLE ON PART-TIME HOME
DEAR BOB: Thank you for all the great information on reverse mortgages for senior citizens. However, I rent a city apartment, which is within two blocks of where I work. I love my apartment. My landlady wouldn’t dare raise my low rent (I take care of her property, don’t charge her for collecting the rent from the four other tenants, and she knows she can’t get along without me). However, I own a modest “country place” where I often go on weekends. It is about an hour away from the city. I own it free and clear. Based on comparable nearby home sales, it is worth around $275,000. As I am 68 and realize I can’t keep working forever (although I enjoy my job and have no plans to retire), can I obtain one of those reverse mortgages on my country home? – Nathan G.
DEAR NATHAN: Not yet. Senior citizen homeowner reverse mortgages are only available for your principal residence.
If you move to your “country place” to make it your principal residence, then it will become eligible for a reverse mortgage to increase your retirement income.
CAN CONDO ASSOCIATION PROHIBIT INVESTOR FROM BUYING?
DEAR BOB: Can a condo homeowner’s association prohibit an investor from buying more than one condominium in the same complex? I own a condo and we are having trouble with an investor who buys up virtually every condo in our complex that comes up for sale. We are very concerned his purchases will result in too many rentals, thus harming our ability to resell. What can we do? Kay Y.
DEAR KAY: If your condo homeowner’s association CC&Rs (conditions, covenants and restrictions) prohibit an owner from acquiring more than one unit, I am not aware how such a prohibition can be enforced.
In many condo complexes, especially when the project is new, the builder or developer often retains several condos either as investments or because he can’t find buyers.
I have no answer to your question what you can do to prevent that investor from buying condos in your complex as they become available for sale. Many condo associations restrict the number of allowed rentals in the complex, but enforcement depends on the good faith of the condo owners. Too many rentals is a huge problem that affects the market value and salability in a condo complex.
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