St Augustine Real Estate Information

Question: I bought a house with my ex-fiancé, but unfortunately the relationship dissolved. We both have joint ownership of the home. Should I buy him out and keep the house or give him a lump sum with the condition that he refinance the home in his name? If I keep it, I'm afraid I won't break even in the next few years with this current housing market.

-- Cary Xiong, Pontiac, Mich.

Cary: I bet you thought there were only two of you in your relationship when you bought the house with your ex-fiancé. But in reality, there were three: You, him and your lender.

Unfortunately, you can't completely break up with your ex without calling it quits with the lender, too.

I'm presuming, of course, that both your names aren't just on the title but also on the loan. That means that the lender will hold you both equally responsible for the debt -- and won't be eager to let either of you go unless the person who keeps the house can prove that he or she can keep up loan payments, too.

The cleanest way to break up with the lender is to sell the house. Then you and your ex can split the proceeds according to your respective investment in the property. Given your doubts about the future of your local housing market, this may be the smartest choice.

It may take a long time to sell your house, however, especially given the slowdown of the auto industry in your area. So another option is for both of you to move out, continue to meet your mortgage obligations and rent the place out until the market recovers. (Although most economists are predicting that the overall housing market will improve within the next two or three years, it's anyone's guess when that will happen within particular neighborhoods.)

But if you can't stomach the thought of keeping financial ties with someone with whom you've severed emotional ones, then you must  decide which one of you is most able to handle a mortgage payment solo -- because that's all that your lender partner cares about. You and your ex should investigate refinancing together since whoever shoulders the new debt will also have to deal with a new interest rate and closing costs. Any home equity accrued during the time you both lived there will reduce the amount owed. The lump sum that the other person pays should reflect that.

As you split your financial obligations, don't forget to sever your legal ones, too. The partner who is giving up ownership of the home needs to sign a quitclaim deed -- in which that person relinquishes any legal claims to the property -- that must be filed with the county.

Your lender can help you with the technical aspects of the breakup. But only you and your ex can figure out how much post-breakup contact you can stand and whether the potential financial benefits outweigh the emotional costs.

-- By June Fletcher
From Wall Street Journal Online

If you don't have a TV, a radio, or a newspaper, you may have missed all of the negative press surrounding the mortgage and housing markets. The severity of the situation has created a sort of panic that has paralyzed the consumer. Rather than deal with any aspect of the problem, we wait for someone to yell: "it's OK to come out now!" If you are waiting for a "bottom" to the overall crisis, and for all the news to turn positive, don't hold your breath. But where there's tragedy, there's opportunity. Let me show you why it is, in fact, "OK to come out now," and why you might be sorry if you wait too long.

The Pendulum Effect.

Depending on the data you are looking at, national average home prices are down significantly. On average, this trend will continue, but consider three things. First, the hardest-hit markets drag down the average depreciation. Second, mid to high priced homes were more inflated than entry level housing. When those homes depreciate, they have farther to fall than a lower priced home. This also brings down the average. Finally, because panic can create a knee-jerk reaction among sellers, and market perception can create a hesitance among buyers, prices can be lower on the way down than they will be at the bottom.

What does this all mean? It's a GREAT time to shop for a moderately priced home. When the market has found a solid bottom and the demand returns, there will be a lot less ambiguity about what a home in your area is really worth. Sellers will be less willing to entertain offers, and selection will decrease.

Mortgage Meltdown?

The news might have you thinking that no one can get a loan these days. This is far from true. Hindsight has given us a clear picture of the kinds of loans that shouldn't be offered again. But the loans that have performed more consistently are still abundantly available, and you might be surprised what you can qualify for.

Banks like to see to see strength in at least 2 of the 4 areas:

1. Credit Score
2. sufficient verifiable income for the payment amount
3. equity in the property or down payment
4. Liquid assets (money in the bank, stock market, IRA's, 401k's, etc...)

The items that will make your loan more difficult to obtain:

1. Non-Owner Occupied (investment property)
2. Stated or No Income (meaning you can't prove it with W2's or Tax Returns)

Bottom Line: If you can legitimately afford to make a regular house payment, there's a very high chance that this can be proven to a lender, who will in turn be happy to give you an excellent loan.

To make things better, interest rates are historically low. At the very lowest point in mortgage rate history, a 30 year fixed conforming loan danced around the 5.0% range. In the last several weeks, it has dropped to 5.625%.

There's even further impetus to act on this information. Even if prices decline another 10%, due to the market panic, there are sellers out there right now selling for 20% under current appraised value. So you might find a house for $160,000 today that will end up being worth $180,000 when the market bottoms out. A paradox, but true. This also means that your value is likely to be at it's highest as far as refinancing is concerned, and remember that EQUITY is one of the positive factors banks consider.

If you think you might be in your current home for more than a few years, have an adjustable rate mortgage, or have an interest rate that's over 6%. Or if you are a potential home-buyer, it is "OK to come out now," and doing so could save you lots of money.

By Matthew Graham - OP-ED COLUMNIST