Question: I'm a senior citizen interested in buying a home for myself and my husband. Can a reverse loan be used to acquire a home?

Answer: A reverse mortgage cannot be seen as acquisition financing.

With a reverse mortgage an owner with real estate equity receives money from a lender. The lender then has a claim against the property and is repaid when the home is sold or the owner moves or dies. In addition to principal, the lender also receives interest, up-front fees and -- in some cases -- an equity interest in the property.

Question: I have two properties. One is a vacant unused lot and the other has a house on it. They are both adjacent to each other and I wanted to refinance them together. How would I go about this?

Answer: Speak with lenders about a "blanket" mortgage -- one loan secured by two or more properties.

However, consider what may happen if you want to sell one property. To sell one, you would be forced to refinance the remaining one. Alternatively, if you have one loan on each property you could then sell one without disturbing the financing on the other.

Question: What will I need to do if my ex-wife refuses to sell our house. Our divorce was final in February (which she also ignored and had nothing to do with) so the court made it final without her signature. The divorce says the house should be put up for sale within six months. We are both still living in the house.

Answer: A broker cannot list the property without clear authority to sell it and a buyer will not purchase unless a sale agreement is signed by all of those required to approve a transaction.

Your ex may object to a sale because she still resides on the property or, simply, because divorces can be very difficult for all parties.

Try this: Have a broker suggest a market value for the property. Then tell your ex approximately how much she will receive from the proceeds. If that doesn't work, you may need a specific court order if you do not now have authority to sell the property by yourself.

Question: Who is ultimately responsible for prepayment penalty on an existing mortgage when the buyer wants to pay off the existing loan.

Answer: The loan is secured by the property. When there is a change of ownership loans are typically paid off at closing from the proceeds of the sale unless the loan is assumable.

The loan is between the current property owner and the lender. Unless there is a requirement in the sale agreement to the contrary, the borrower is responsible for the penalty.

Question: I am entering into a lease/purchase agreement, however, am I having some difficulties working out a percentage. What percentage of the rent normally goes toward the purchase of the home if the tenants buy?

Answer: The percentage of the monthly payment which is credited toward the purchase, if any, is a matter of negotiation. However, such transactions are complex and should not be entered into without a legal review of all documents before you sign any paperwork.

As an example, will a lender allow all of your "credit" to go toward the purchase of the home? Speak with lenders now and ask exactly what they permit. For instance, must the owner keep the credit in an account until the sale?

Are you paying a premium rental? If yes, what happens if you elect not to buy or cannot buy? In essence, you've paid extra for rent.

As well, what happens if the property is foreclosed? Burns down? Is located in a community with rent control? Etc.

Question: In our community we had a real estate crash several years ago after prices rose 180 percent during a four-year period. We are now seeing another huge price run-up. Will there be another crash?

Answer: No one knows.

That said, was there a crash? If you bought during the first period when prices rose and did not sell or refinance until prices again picked-up, are you not substantially ahead?

Real estate is a commodity. Prices can rise and fall and both the decision to purchase and not-to-purchase represent risk. In each case it makes sense to consider such factors as interest rates, how long you expect to own a property, local population growth, the local economy and building levels.

Have a real estate question? Send your inquiry to . Because of the volume of mail received, Mr. Miller cannot respond to questions individually or privately. Published letters may be edited for space and style. For comments regarding other Realty Times articles, please contact individual authors by pressing here.

This column is designed to provide accurate and authoritative information in regard to the subject matter covered. It is made available with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, or other professional services. If legal services or other expert assistance is required, the services of a competent professional person should be sought.

Published: April 30, 2004

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