Your Questions About Mortgage

Steven asks…

How does rental income on a 1st mortgage affect mortgage affordability on a second home?

For example if my 1st mortgage is $1000 per month and i charge a rental income of $1000 per month, is it a wash? Or do i get the $1000 rental income added to my gross monthly income and have the $1000 mortgage payment added to my monthly liabilities?

admin answers:

I’ve been through this several times. A lot depends on the specific lender but here are the basics.

1. All lenders factor in something for vacancies and repairs when calculating your rent income. My lenders count 80% of the rent as income, some lenders only 75%. At 80% a lender would say you’ve got $800 income per month, a $1,000 payment, so you’d have a net loss of $200 per month.

2. Some lenders require a history of rent for a property before they’ll count it as income. Some require a year, some 2 years. The reason for this is to substantiate your claim of $1,000 a month rental income. In other words, what’s to stop you from saying it’s $1,000 a month when it’s really $600?

James asks…

How does my mortgage affect letting my house out?

I have an interest only mortgage with my mortgage lender but I would now like to let my house out.

I have been advised that if I let my house out I am obliged to let my mortgage provider know.

I don’t know what the repercussions of this would be if I did or didn’t tell them. How would they find out if I just let it out anyway? What would they do if they ever found out? If I meet their mortgage repayments they shouldn’t have a problem, should they?

Can anyone enlighten me on these matters?

admin answers:

If your mortgage agreement states that you must notify the lender if you rent your house, then you must do so or you are violating the agreement. If you are in violation, the lender may demand repayment of the debt. If the agreement is silent on the matter, you are free to let your house with no repercussions. Naturally, you still have to satisfy your mortgage payments. Read your mortgage contract to find out what it says about the matter.

Thomas asks…

Can a mortgage company file a 1099 when you are in default without a summary jugement?

We are residents of Texas and the property in foreclosure is in Delaware. Second mortgage holder is threatening to file a 1099.

admin answers:

Yes they can. TX practice is to use a Trust Deed, not a standard mortgage. No court action is needed to foreclose on a TD.

No judgment is needed to write off a bad debt and send the borrower a Form 1099-C for the COD income.

The lender has decided that you are not worth suing for the debt and is trying to use the threat of a possibly massive tax debt (that the IRS WILL collect) to prompt you into paying something towards the debt that you owe.

Susan asks…

How does mortgage companies work when a person dies?

My mom and younger sister are both named on the mortgage. Payments are still being made. My mom just passed and my sister does not have a job because she was caring for our ailing mother.

admin answers:

Depends on how they held title to the property. IF there was a right of survivorship between sister and mother, it passed outside of probate to the sister, and they begin foreclosure.

If not, Your mom’s estate will need to be probated and it gets really complicated and you need a probate lawyer

Donald asks…

Can my mortgage company take life insurance money I received as beneficiary?

I have a house I need to get out from under. I may foreclose on it. Or, do a deed in lieu of a foreclosure. I want to file hardship due to the loss of my brother, whose income I depended on to pay for the house. My husband just passed away on the 3rd. I am living in his house. I cannot keep two houses. Can my mortgage company come after me for any money I received as a beneficiary?

admin answers:

“File hardship”? Where?

Once you receive insurance beneficiary money, it’s just your money – period. The question of whether the lender can “come after you” stands on it’s own. The source of your money makes no difference – it’s not shielded any differently from the rest of your money.

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