Ask David...

“Real life answers to your Real Estate questions”

Dear David: Our bank is offering us mortgage insurance, is it a good idea? — Safety Net Dear Safety: While you’ll hear arguments for and against, the decision to purchase mortgage insurance is based on your personal risk tolerance. You may want to investigate what insurance policies exist outside of the bank. Depending on your circumstances, I recommend getting independent insurance advice so you can make the best decision based on your needs. While it’s difficult to think about, having an insured mortgage can offer peace of mind for your loved ones should something catastrophic happen. Dear David: We just signed a 3-year lease for our business and my wife and I have decided to split up, what do we do now? — Heartbroken Dear Heartbroken: I’m very sorry to hear about your circumstances. Yet despite what has happened personally, a lease is a contract like any other and you are responsible for living up to the terms. If you choose not to carry on with your business at its current location, my best suggestion is that you try and sublet the property to another tenant whom the landlord deems acceptable. Because you are under contract, your financial obligations will remain until the end of the term, or until you can find someone else to take over the lease. Dear David: We qualified to purchase a $500,000 property last fall, but with the new mortgage rules, we currently only qualify for a $ 400,000 purchase. What are our options, we know we can afford more! — Great Expectations Dear G. E.: You are not alone. Many people who pursued mortgage pre-approval late last year have seen their affordability (or the government’s opinion thereof) reduced since the new mortgage “Stress Test” took effect in early January. Rising property values have only added to the discontent, as $400,000 in today’s market buys a bit less house than it did a few months ago. My suggestion is that you adjust your plan a bit and purchase something in the 400k range. If your credit is solid, you may also consider asking a family member (Mom, Dad or Grandma, for example) if they would co-sign with you so you could purchase something more in line with what you had initially imagined. Qualifying for a mortgage on your own has been the norm for quite some time, but this is a reflection of abnormally low interest rates and wasn’t always the case. Once upon a time, it wasn’t uncommon to have a co-signer on your mortgage, especially when a 25 percent down payment was required. Having a mortgage co-signer now doesn’t mean you can’t go it alone in the future. You may qualify on your own by your next mortgage renewal, depending on the terms you take. If that’s the case, you can give your co-signer a big thank you hug and have them removed from the mortgage.