Quick home sale could save owner’s credit rating
Equity-rich but financially troubled owners should consider putting their home up for sale quickly rather than risk damaging their credit score by missing future payments.
Q. I lost my job last year and have been unable to find a new one, and it is getting to the point where I can no longer make my monthly mortgage payments. I have a lot of equity in my home and tried to refinance it to lower my payments, but no bank will give me a loan because I am unemployed, and I don’t qualify for any of the government’s “save-your-home” plans. I visited a financial counselor, who recommended that I put my home up for sale immediately and stop making the payments because it would take at least 90 days for the bank to begin foreclosure proceedings — a strategy that would allow me to continue living in the house without paying any money for at least three months. What do you think of this idea?
A. I agree with the counselor’s suggestion that you should put the home up for sale immediately. However, I strongly disagree with the counselor’s recommendation to stop paying the mortgage altogether.
Sure, skipping the next few payments would allow you to stay in the house for at least 90 days on a mortgage-free basis before foreclosure proceedings could begin. But when the home is eventually sold, all those missed payments (plus back-interest and perhaps thousands of dollars in other fees and penalties) will be taken out of the sale proceeds — thus leaving you with a lot less cash than you would get from your built-up equity if you could instead somehow find a way to keep making the monthly payments until the deal closes.
In addition, if you stop making your payments, your credit score would soon plummet. That means that you would have to pay a higher interest rate or might not be able to get another mortgage at all, even after you find a new job and are ready to buy another home.
Good luck, and I hope you regain a solid financial footing soon.
Q. The company that provides our homeowners insurance has sent us a letter stating that it will not renew our policy when it expires in July, but it did not say why. Aren’t we entitled to an explanation?
A. Yes. Insurers in every state must explain to consumers why they intend to drop a policy and also provide a certain number of days (a figure that varies from state to state) before the policy can be terminated or fail to be renewed.
Call your insurer or insurance agent for an explanation. If you are not satisfied with the answer, contact your state’s insurance department or department of consumer affairs for help.
Q. My house is separated from a neighbor’s by an old wood fence that has fallen down in several places. I asked the neighbor if he would share the cost of replacing the fence with a cement or brick wall, but he refused. Could I tear down the fence and have a new wall built if I paid the entire cost myself?
A. I guess the guy who lives next door is not a big believer in poet Robert Frost’s observation that “good fences make good neighbors.” But no, you cannot tear down the old fence and build a new wall — even if you are willing to pay for it yourself — unless you first get written permission. That is because it stands on your shared property line, so you cannot do anything to it unless you first get his approval.
It would be great if the neighbor is willing to sign a simple letter that would allow you to rip down the fence and build a new wall on the property line. But if he will not, you have an option: Leave the fence alone, but build the new wall 6 inches or a foot on your side of the property. You would lose the use of a few inches of your land, but at least you would get the wall that you want.
As an added bonus, the neighbor would be stuck looking at that rickety old fence all by himself because it would be on the other side of the wall, out of your own view.
Send questions to David Myers, P.O. Box 4405, Culver City, CA 90231-2960, and we’ll try to respond in a future column.