Your basic real estate questions, answered
Q: If I pay off my home mortgage, what happens to the equity that I’ve built up in the home?
A: Home equity is the difference between what you owe a lender and what the home is worth. Let’s say you have a home that’s worth $300,000 and you have a mortgage on the home for $200,000. The mortgage is your “debt.” Subtract the mortgage loan balance ($200,000) from the current value of the home ($300,000) to come up with the amount of equity you currently have in the property ($100,000). When you pay off the mortgage, and any home equity loan you’ve taken against the home, the property is said to be “free and clear” of the lender. Now, the entire value of the home, which is the equity, would be yours if you sell the property, minus any sales commission or fees you pay. If your home is worth $300,000 and there are no loans, you would have equity of $300,000 in the property. If you were to sell the home when you had $200,000 in debt, your proceeds from the sale would be your equity of $100,000 minus costs of the sale. If you’ve paid off the home, you’d get $300,000 minus the costs of the sale.
Q: In Illinois, do changes to a condominium’s rules and regulations require approval from the association residents?
A:
Sam often tells his clients that they have to think of the governing documents in a homeowners association like the laws and rules that govern the U.S. The condominium declaration or homeowners association declaration is like the Constitution of the United States, and the rules and regulations are like laws passed by the Congress. If your association’s main document says that rentals are not allowed and you want to change that, you’re going to have to get a majority (or, in some cases, a supermajority) of homeowners to vote for that change. Now, if the governing document says that rentals are allowed, subject to rules enacted by the board of the association, the board will have discretion to make those rules without the unit owner’s approval. Basically — and there are exceptions to this — a homeowners association or condo board association votes for the members of the board of directors. The board governs the association and has great leeway in making decisions on behalf of the unit owners. In general, the board does not need unit owners’ approval to enact rules and regulations for the association. Also, only owners have the right to vote for the members of the board of directors of associations, and only owners get the right to vote for matters that come up in these meetings. If you are a renter in a unit in the building, you don’t have the right to make decisions or tell the owners or the board of directors how they should run the building. You can make suggestions, but that’s as far as it generally goes.