DEAR BOB: I am about to refinance my property and pull out a lot of cash for future investments. But the property has an unused HELOC (home equity line of credit) that I will have to close since I would rather have $160,000 cash instead of having the HELOC subordinated. However, I am going to get hit with a $500 prepayment penalty for closing the HELOC before three years. It has been open about 1.5 years. Is there any way to avoid the prepayment penalty? – Chip C.
DEAR CHIP: Let me get this straight. You don’t want to pay a $500 prepayment penalty on your credit line so you can take out $160,000 in tax-free cash from your first mortgage refinance.
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Sorry, I am not aware of any way to avoid that $500 prepayment penalty on your HELOC. Have you tried politely asking the lender to waive the prepayment penalty if you pay the lender’s costs of clearing the HELOC from your title?
Considering it probably cost you nothing to obtain that HELOC, and the lender absorbed the cost of appraisal, title insurance, document preparation and recording, since the lender hasn’t earned any profit from your unused HELOC, it’s really fair for that lender to receive its prepayment penalty.
CHECK HOMEOWNER’S TITLE INSURANCE POLICY FOR LEGAL TITLE
DEAR BOB: I just wrote my Senator to try to obtain a legible survey of my townhouse. The county’s record is illegible. I need to know the exact boundary before I pursue a neighbor’s rotting fence. Do I have any recourse? – Angel A.
DEAR ANGEL: Your county or city keeps recorded subdivision maps on file after a new subdivision is recorded. I presume your townhouse is part of such a subdivision.
If the recorded map is illegible, another source to check is your homeowner’s title insurance policy. It usually has a legal description of the insured parcel.
However, if that doesn’t work, I suggest a visit to the title insurance company that insured your title when you bought your townhouse. Most title insurers have duplicate “title plant” records, just the same as the official county or city title records.
HOW MANY RENTAL HOUSES CAN INVESTOR OWN?
DEAR BOB: I recently read the book you highly recommended “Building Wealth One House at a Time” by John Schaub. My wife and I currently own two rental houses and have found them to be great investments, thanks to the tax shelter and the appreciation in market value. My question is how many rental houses do you think we should own and still manage them ourselves? – Steve R.
DEAR STEVE: In the past, I owned 15 rental houses at the same time. I found that was too much to manage without getting “stressed.” So I began gradually selling them off, taking back second mortgages for income. I discovered collecting monthly mortgage payments was far easier than collecting rents.
Do-it-yourself husband-and-wife landlords can easily manage a half-dozen rental houses without any employees. Beyond that, you will probably need to hire at least part-time employees.
The new Robert Bruss special report, “How to Earn Up to $250,000 (or More) Tax-Free Profits Every 24 Months Buying and Selling Houses,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet PDF delivery at www.bobbruss.com. Questions for this column are welcome at either address.
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