Question: I own a condo. Paid $130K in 1994. I owe $90K still. Condos identical to mine now sell for $279K. But if I sold merely to reap the profit, I would only be able to buy another condo just like it. Modest houses here are $350K up. (I make $50K/year and raises won't be much in the future.) I plan to retire at age 67 in 2014, so I have been paying additional principal every month ($200) to be mortgage free by mid-2013. (Interest rate is 8 percent -- high, I know, but I haven't wanted to pay the $2-3K quoted refi fees and figured $200 extra principal each month had the same effect.) I would very much like to move into a HOUSE. I have cats and dogs and want to garden. Advice?

Answer: Please speak with other lenders -- you may be able to refi without paying thousands of dollars at closing.

As this is written financing is available at 5.5 percent with no closing costs. The interest rate is a touch above the market because the lender is paying for such things as a title search, settlement fee, etc. The debt, the principal amount, is NOT increased to cover closing expenses. At closing you would have costs for escrow reserves, but not the loan itself.

In general, $90,000 at 8 percent over 30 years gives a monthly cost of $660 for principal and interest. You also have costs for property taxes, property insurance, and a condo fee -- the last item would not typically be a cost for a detached home.

If you sold for $275,000 you would net about $160,000 ($275,000 less $90,000 = $185,000. Less costs for marketing and closing will leave $160,000 or more).

If you bought for $350,000 and put down $160,000 your mortgage would be $190,000. At 5.5 percent your cost for principal and interest would be $1,079. Given your current payment, $660, and your prepayment, $200, it would cost you another $220 per month for principal and interest -- before larger tax write-offs and with no condo fees. It's possible when all is considered that your actual cash cost after taxes might not be much different than what you are now paying.

The catch is that you may not want to take on a new loan with a 30-year term. In that case, speak with lenders about "one price" refinancing for the condo -- you may be able to reduce your monthly payment for principal and interest from $660 to $511 -- meaning there would be another $150 that could go to prepayments if allowed without penalty. And without a cash cost at closing.

Question: I'm a new board member in my cooperative. One of our shareholders has defaulted and his apartment was sold at auction for 1/3 the current market value. The buyer owns a realty company and is paying cash for the apartment. We (the board members) suspect that the buyer will turn around and resell the apartment. Can the board reject him on the basis that we are looking for owners to live in the cooperative and that this property is not for investment purposes? Our proprietary lease does not contain anything regarding this unusual situation.

Answer: All real estate is, to some degree, an investment. As well, the buyer may well move in.

Co-op boards have historically wielded enormous power and a major reason to accept or reject buyers is to assure the financial well-being of all owners.

In this case the problem is that the unit owner defaulted on a mortgage. The lender has a right to recover it's equity through a foreclosure action.

The board, for its part, could have bid for the unit at the auction and then re-sold it. Or, if the owner is in bankruptcy, a judge may not accept the auction result because far more could be obtained for the property. It may be possible that someone will make a better offer to the judge. Such things happen.

It is to the co-op's advantage to sell units for the highest possible price -- that's good for all owners. In this case, a buyer has made a good deal. That the buyer is a broker or not a broker is not an issue.

The buyer should be treated according to the same standards which arise with any other purchaser. If the broker sells shortly at a higher price, then the board will have accomplished a major task by assuring a strong market for the units. In effect, the new owner who wants to quickly re-sell will help the co-op obtain the result everyone wants.

Alternatively, the board could refuse to accept the buyer. This leaves the problem of a unit still to be sold, a lender with unsatisfied claims, a buyer who lost a good marketplace opportunity and the possibility of a forthcoming pile of legal bills. All-in-all, the cheapest and best solution may well be to let the buyer purchase the unit and re-sell it, if that is his or her plan.

Question: My daughter is looking into purchasing a new home for the first time. She is being told that she needs to use the "floating interest rate," as opposed to a "locked interest rate." I feel this would not be the best option because if the interest rate increases, so would her house payments. Do you know why she would be told to use the other option of a floating interest rate?

Answer: It usually takes several weeks between the time you apply for a loan and the mortgage closes. During this period interest rates may rise, fall or stay the same. If you "lock" in an interest rate at application it means you are certain to get that rate at closing if your loan is approved. However, if you feel that interest rates may go lower, then you may want to let the rate "float" and accept whatever rate is out there when you go to settle the loan.

In some cases, lenders allow borrowers to lock at application and to re-lock one time prior to closing.

If you are uncomfortable with the lender's suggestion, then speak with other lenders before selecting a mortgage. Let each explain their lock policies and why you should lock or float at this time. Be certain that a "lock" applies to the interest rate and any loan discount fees (points) and/or origination fee. Look at the annual percentage rate (APR) for each loan.

Question: When I moved into my community with a pet, fences four feet high could be built, with exceptions when safety is an issue. Moving into the community, knowing I had a 160 lb. dog, fencing requirements were considered. Since six-foot fences were allowed, proper containment for my pet was not an issue, making my decision a responsible one. Now there is an effort to limit fences to four feet. Living on a corner lot exposes people to my pet. What exception or recourse do I have as a member of this association?

Answer: Ask about being grandfathered in under the old standard -- and explain that you'll pay for the fence.

If that doesn't make sense, then discuss what liability insurance the association has should the dog bite some because it cannot be properly contained. Ask for an increase in insurance coverage to be paid by all association members -- that would be prudent given that the association is on notice regarding a potential problem.

This is a case where people should use common sense -- you bought under certain conditions and changing those conditions needlessly increases the association's liability. If the association wants, it can say that from this point forward (after your fence is built) no six-foot fences will be allowed.

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Published: March 19, 2004

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Have a real estate question for Realty Times? Wondering about buying, selling, financing, refinancing or renting? Here's where you can send your question to Peter G. Miller, OurBroker®, a nationally-known columnist, author and reporter. Peter G. Miller has written six books -- including The Common-Sense Mortgage -- a guide with hundreds of thousands of copies in print. Miller was the original creator and host of America Online's Real Estate Center and joined Realty Times in 1998. Send your questions to . Because of the volume of mail received, individual questions cannot be answered privately and not all questions can be used. Published letters may be edited for space and style and all letters become the property of Realty Times upon receipt.