Question: I own two houses and I'm having financial troubles with one. If I can't continue the payments for the second home and the lender ends up foreclosing what could happen to my primary home? Could I lose it?

Answer: Is the loan on the second property "recourse" financing or "nonrecourse." If it is "nonrecourse" then your liability is limited to the sale value of the property -- meaning that the lender cannot go after you for any unpaid principal.

Also, what is the value of the second property? If the value at foreclosure is sufficient to pay off the mortgage plus all related foreclosure fees and costs then that would end the matter, except that your credit standing would be terribly damaged.

It is also possible that the value of the second home is strong enough so that you might actually get cash back from the foreclosure sale. This can happen if you have a lot of equity in the property and your local marketplace does not have a foreclosure discount.

However, if you have recourse financing and the value of the second property is insufficient when foreclosed to cover the entire debt, then the lender may well be able to sue for any unpaid obligations. To satisfy this debt it may be necessary to refinance or to sell your personal residence.

While suing borrowers doesn't happen often, it can happen. For specifics, speak with an attorney in your local community.

Question: I have an $82,000 mortgage at 6.5 percent on my house. My payment, including taxes, insurance and mortgage insurance, is $780 monthly. I want to buy another property outside the U.S. Instead of selling my home, I'd rather refinance to get cash out. If I owe $180,000 instead $81,000 will my property taxes go up? Can the use of this money be restricted?

Answer: Very possibly, yes. Here's why: When you refinance the property a new loan will be recorded. A loan for a higher amount than the current mortgage is evidence that the value of the property has increased. When next the property is re-assessed the fact that you have a larger loan may impact its valuation, especially if the value of the new loan is greater than the current assessed value. The ultimate result is that a higher property value can be assigned to your home and thus your tax can go up.

Example: You bought a home for $200,000 ten years ago. You refinance for $450,000. It's hard to argue that the property is still only worth $200,000. For specifics, call your local property tax office and ask about their policies. You don't have to give your name to ask a general question.

As to the use of proceeds, how you spend the money is typically up to you. There can be some situations where the use of the money is restricted, but that's not usually the case.

Question: I retired to Florida and now I'm thinking of selling the home I own up north, a property without a mortgage.

If I have the northern home appraised and I sell the home for more then the appraised value, am I liable for any fees or fines if I don't inform the buyer of my appraisal?

Answer: An appraisal is an estimate of the value provided by a professional appraiser. The fact that one appraiser suggests a given value for a property does not mean that you are required to sell the property for that value or that another appraiser might not offer a different valuation.

When somebody buys a property they typically will get a loan. As part of the process to get that financing, the lender will insist on an independent valuation. The lender will then look at the sale value and that the appraised value and consider financing only the lower of the two values.

There is nothing that says a buyer can't get his or her own appraisal or a valuation from a buyer broker. As well, no one would suggest that a purchaser somehow owes a fine or fees by offering less for the property then the appraised value.

Your job as a seller is to get the highest price in the best terms possible for your property. If it happens that the marketplace rewards you with a valuation that's higher than the appraisal you obtained before marketing the property that's great. If you and the buyer agree to a price which is consistent with the neighborhood then frequently the lender's appraiser will agree. In that case you can have a sale for more than the earlier praised amount.

Before getting an appraisal, speak with your real estate broker for the northern property and ask if there is any requirement to reveal the result. Unlike a property inspection which shows material damage, I would say you have no obligation to show a pre-sale appraisal but see what the broker says. If his or her answer is yes -- perhaps because of a state requirement -- then skip the pre-sale appraisal and ask the broker to provide a cost-free competitive market analysis (CMA). If the property is not yet listed, then get opinions from two or three local brokers. Brokers will provide CMAs as part of their effort to list the property at a price appropriate to the market.

Question: I co-own a home. The other owner and I each have separate loans, but are both on the deed. I am currently living in the home, the co-owner is not.

I want to foreclose on my half of the property to get away from rising mortgage costs that I cannot afford.

I'm trying to avoid spending thousands of dollars in legal fees, so suing for partition is not a feasible option for me.

The co-owner tried to file paperwork and thought they were suing to partition, but it turned out to be something entirely different. We are now both using lawyers to litigate. Within a month or so, we are going to arbitration to determine if the home should be sold or rented. The market is such that renting it out will most likely happen, which means waiting several more years to sell.

I can't afford to not have renters pay my mortgage for even one month. The co-owner is not paying his half of property taxes, HOA fees, or homeowners insurance because he feels I own him money for a room that is unrentable.

My loan is an ARM, and I would need my co-owners' signature to get fixed-rate financing. He will not sign for me, so I'm stuck with an ARM that will just keep rising and rising.

How can I foreclose on my co-owner?

Answer: You cannot "foreclose" on your co-owner. Only a lender can foreclose. If you don't pay your mortgage, your lender can foreclose on you and effectively force the issue.

It appears that what you have is an "equity sharing" arrangement with one resident investor (you) and one non-resident investor (him).

As the resident investor you are using 100 percent of the property. Since your co-owner owns a percentage of the property you should be paying a proportionate share for the mortgage, taxes, insurance and HOA costs. You should also be paying a rent to your co-owner for his portion of the property, a portion you are using. He, in turn, is responsible for his share of the mortgage, taxes, insurance, etc. In other words, you are not renting a specific room from him, you are renting a portion of the entire property.

You now have attorneys and you are going to arbitration. You will have an opportunity before the arbitrator to explain that continued ownership of the property represents a hardship to you. As well, you should document your HOA, insurance and other payments.

As to the arbitrator, I would expect that the first thing he or she will want to see is the written equity-sharing agreement between you and your co-owner. That document should outline the obligations of both parties and also explain what happens when one party wants to sell and the other does not.

If there is no written equity-sharing agreement, or one which is imprecise, then the arbitrator will be free to make just about any decision and for just about any reason. You and your co-owner might want to re-consider this entire matter, reduce your legal costs and simply see if something sensible can be worked out.

For instance, if your co-owner wants to keep the property perhaps he can buy out your interest. This would seem to solve everyone's problem.

Question: If I refinance my home, do I have to purchase a whole new title insurance policy?

Answer: Your lender will want to assure that it has the first or second lien on the property (as appropriate) and so will insist on a title examination and title insurance in all jurisdictions except Iowa -- that jurisdiction has a state-operated title guarantee program.

The logic of the lender's requirement is that they do not want to find that other lenders have prior claims which must be paid in full if the property is foreclosed -- claims that would have to be paid before your new lender gets a dime.

However, ask your closing agent if a new title policy is available at the discounted "re-issue" rate, a rate which is sometimes available if a property was recently financed or refinanced with title insurance.

Question: I purchased my condo three years ago. When I went to refinance my home, I found out it's in a flood area as per FEMA. When I purchased the condo nothing was said about flood insurance. My building has six units and no one has flood insurance. The refinance on my home has been approved, but flood insurance is holding up the closing.

Am I responsible for flood insurance or does the HOA take care of this?

Answer: When you bought the property you had a mortgage. Did the original lender require flood insurance? If not, has anything changed since the purchase?

You might want to ask if the original lender can provide new financing -- and if flood insurance will be required. Also, see what flood insurance is maintained by your HOA. It may be that both you and the HOA require coverage. It may also be that different lenders have different policies, or that at some point during the past three years flood plain maps were changed.

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