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By Ilyce Glink
12/4/2008 3:43:00 PM
Q: My job is moving to another state. With today's poor real estate market, I will not be able to sell my current home without taking a substantial financial loss, which I cannot afford.
I've rented out my house and will be moving soon. I plan to purchase a house at my new location and will try to carry two mortgages. If I'm not able to keep up with two mortgages and am forced to give up my old house to foreclosure or short sale, what ramifications, if any, will it have on my new home and on my credit rating?
A: Let's back up a moment: Why would you purchase a new house if you cannot sell your old house without taking a substantial loss?
You should be able to rent far more cheaply than you can own at this point in time. If you rent a property instead of buying you won't have to commit extra cash for things like homeowners insurance, taxes, maintenance and upkeep. It should be far less of a strain on your budget to rent rather than buy a house.
As time goes on, and your finances become stronger, you can consider purchasing a home in your new location.
As far as foreclosures and short sales go, they're a heavy blow to your credit history and credit score. It's not quite as bad as having a bankruptcy on your credit history, but you could see your score decline by 100 points or more if you go into foreclosure or complete a short sale. That loss of 100 points or more would be in addition to any loss you may face if you stop paying your mortgage on that home.
I would try to live as cheaply as you can in your new location, save as much money as possible, stay current on your old mortgage, and try to plan for a time over the next few years when you can sell your house and move on with your life.
Q: My fiancé has her name on three separate mortgages for two different commercial buildings with her ex-husband. According to the divorce decree, her ex-husband has until August 2009 to refinance the mortgages.
He wants to do an assumption, which will not take away her liability. He had her sign something last weekend, which in theory says the lenders have agreed to take away her liability from one of the properties.
I don't trust her ex-husband and I have no idea what she has signed. Can you shed some light on what she may have signed?
A: I have no idea what your fiancé signed. But I hope she read the document thoroughly and had her attorney look at it first. But, I'm guessing that neither of those things happened, which is why she can't explain to you what her liability is or will be.
You didn't ask this question, but I'll throw out another little piece of advice: You should really make sure you understand everything there is to know about your fiancé's finances and her responsibilities and liabilities on these (and perhaps other) properties. It sounds like she has a financial liability when it comes to these properties, but may not have an ownership interest in them.
If she was careless enough to sign a quitclaim deed, giving her ownership rights to her ex-spouse without him securing new financing that would relieve her of any liability, that would be a big red flag: She may either not fully understand what this means or doesn't care enough to secure her own financial future.
If I were you, I'd want to make sure I understand what her financial obligations are and what she owns and what problems could arise in the future resulting from these obligations.
Q: I am a co-signer on a mortgage. Will a quitclaim deed remove me from this debt?
A: No. Unfortunately it will not. The debt will remain, but a quitclaim deed will take away your ownership interest in the property.
To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center.
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