Home sale could help save credit rating / LJWorld.com

Archive for Friday, May 29, 2009

By David W. Myers

May 29, 2009

Q:I lost my job last year and have been unable to find a new one, and I can no longer make my monthly mortgage payments. I tried to refinance to lower my payments, but no bank will give me a loan because I am unemployed and don’t qualify for any of the government’s “save-your-home” plans. I visited a financial counselor, who recommended that I put my home up for sale and stop making the payments because it would take at least 90 days for the bank to begin foreclosure proceedings — a strategy that would allow me to continue living in the house without paying any money for at least three months. What do you think?

A:I agree that you should put the home up for sale immediately. However, I strongly disagree that you stop paying the mortgage altogether.

When the home is eventually sold, all those missed payments (plus back-interest and perhaps thousands of dollars in other fees and penalties) will be taken out of the sale proceeds — thus leaving you with a lot less cash. In addition, if you stop making your payments, your credit score would soon plummet. That means that you would have to pay a higher interest rate or might not be able to get another mortgage at all.

Of course, everyone knows that housing markets in most parts of the nation remain soft. If you live in one of them, consider setting your offering price 5 percent or even 10 percent below prices for comparable properties in the area.

Q:My house is separated from a neighbor’s by an old wood fence that has fallen down in several places. I asked the neighbor if he would share the cost of replacing the fence with a cement or brick wall, but he refused. Could I tear down the fence and build a new wall if I paid the cost myself?

A:You cannot tear down the old fence and build a new wall — even if willing to pay for it yourself — unless you get written permission. It stands on your shared property line, so you can’t do anything to it unless you get his approval.

It would be great if the neighbor is willing to sign a simple letter that would allow you to rip down the fence and build a new wall. But if he won’t, you have an option: Leave the fence alone, but build the new wall six inches or a foot on your side of the property. You would lose the use of a few inches of your land, but at least you’d get the wall that you want.