Your lender is unlikely to remove your name from the loan voluntarily. Mortgage contracts are written to make it difficult or impossible for the parties to change the terms or conditions. Why? The mortgage originator estimated the risk for the loan based on, in the case of a joint mortgage, both borrowers’ credit scores, incomes, and debt-to-income ratios. With only one person responsible for the loan, the lender is in a riskier position.
If you owe more on the home than it is worth, it’s even less likely the lender would remove your name from the note, as the lack of equity increases the probability that you and your co-borrower will default on the mortgage. Even though your co-borrower may have every intention of keeping the loan current, the lender will want as many people as possible liable for the loan so that it has a higher chance of collecting on any deficiency balance that results in case of default and foreclosure.
So what should you do? Shop around for a loan. While your current lender may not be willing to refinance your loan, you may be able to find another bank willing to lend you the funds needed to refinance. Finding a loan in today’s market can be difficult. However, contact several lenders to find out what options, if any, they offer. But know that it is unlikely you will find a lender willing to lend you more than the home is worth. Because you are upside-down on your current mortgage, you may need a large down payment available in order to obtain a refinance loan. In addition, you will need to compare the terms of your current loan with those of any refinance offered to make sure that the new terms are competitive with those of your previous loan.
There are other options to remove liability for a co-signed or joint loan such as, filing for bankruptcy, selling the property in question, which will extinguish the loan liability, unless there is a deficiency balance, for which you may be able to get the bank’s permission to do a “short sale”, or allowing a “strategic default”.
Buying a house in a Short Sale or Foreclosure
With hundreds of thousands of homes in foreclosure or on short sale lists, there’s never been a better time to score a sweet deal. But discount-priced foreclosures and short sales can come with a raft of expensive problems.
There’s a flood of properties on the market with lots of motivated sellers, says Jim Randel, real estate investor and author of “The Skinny on the Housing Crisis.” “The only people who are selling in a declining market are those who have to sell,” he says. But although they have to sell, you don’t have to buy. Know what you’re getting into before you buy a short sale or foreclosure property and be mindful of these five common mistakes:
1. Ignoring property problems
Most foreclosure property owners didn’t want to leave their house and because of that they’ll often take that frustration out on the property, says J. Scott Steinhorn, a real estate investor, with experience in foreclosures and short sales. Steinhorn has seen foreclosure properties where the previous owners clearly took a sledgehammer to the nice hardwood floors, the tiled showers and the cabinets, just to be spiteful.
Empty foreclosure properties may suffer from issues that arise from neglect — leaks, mold, termites, thieves, squatters and filth — because the property sat vacant for weeks, months or years before purchase. In addition, while short sellers are motivated to sell and repair their credit, they could have skimped on essential maintenance of the roof, furnace, air conditioner and hot water heater.
2. Skipping the home inspection
Clear your calendar and make time to tag along on your home inspection. This is the time where the house is open for all criticism and inquiries. Ask your questions of the Home Inspector, whatever they may be. Ask for repair estimates when an inspector notes a problem, or do some research online later that night.
Some buyers are even doing an inspection before making an offer. While most inspections are done after the initial offer, with the sale contingent upon mutual agreement of the parties, a pre-offer inspection allows house shoppers to walk away and find a better buy.
You may wish to call in specialized inspectors to look for expensive problems such as termites, mold or structural damage and get a full report and repair recommendations . Remember mold gets more expensive to remediate the longer you wait, and it can severely impact your health and the property’s re-salability.
3. Ignoring legal and insurance information
Because bank-owned properties often sell “as is” without disclosure, buyers need to do a little extra research on the home’s status. If the property is in a flood zone, you may pay thousands yearly in additional insurance costs, and you may find it difficult to resell the property, especially after Hurricane Sandy.
4. Leaving too little time
Short Sale and foreclosure home buyers need to be aware that the sale won’t necessarily close as quickly as it would for a traditional home. The short seller’s lender must grant approval of either foreclosure terms or a short sale price which is less than the short seller owes.
“Banks are taking huge losses so they are going to do their best to get their money back, get the most amount of money or go after the seller to try to recoup something,” DeSimone says. “They aren’t just going to let the house go.”
5. Falling hard for a bad home
Don’t assume you’re getting a great deal in today’s real estate market. Consider the house’s condition, inspection and price and ask yourself these common questions:
a. What if the home’s value drops another 20 percent, will you still feel satisfied with your purchase?
b. How much money will you have to pour into the property to make it habitable? If the problems are too costly, you might pass on this home purchase.
c. If you were to buy this property, could you afford to rent it out for as much as, or less than, your mortgage payment?
Sometimes home buyers love a house so much that they close their eyes to patent problems. In short, this may be the right time for you to buy a home, especially if you know what you’re getting into.
2. Get out from behind your computer. Know where your target market is hanging out and go where they are: Talking to three people a day about your business is great, but only one of those can be electronic communication! You need to do your research, find out where your ideal clients go to network, learn, and grow their businesses – and you need to go there too!
3. Be ever present on your social networks, join in the conversation, and provide value and help: Lurkers don’t get clients, don’t build reputations, don’t get remembered, and don’t get referred new business. Social media is a long-term marketing strategy with a long lead generation cycle. Typically people will follow you on Twitter, or be friends with you on Facebook for months or even years before they finally decide to hire you or buy from you. That’s why you need to be ever-present on the social networks you can commit to. Be there with great, valuable, helpful content, answer questions, assist others, join in conversations, be engaged. Sporadic, infrequent posting dilutes the trust your network has in you.
News that health insurers are ending the policies of what might be millions of Americans has rattled consumers and added to the debate over the health care law. If you or a family member has been notified that your individual policy is being canceled at year’s end, you may be stunned and upset.
Health and Human Services Secretary Kathleen Sebelius said in testimony that the law generally didn’t require insurers to discontinue plans that were in effect at the time of the law’s enactment in March 2010. No one knows how many of the estimated 14 million people who buy their own insurance are getting such notices, but the numbers are substantial. Some insurers report discontinuing 20 percent of their individual business, while other insurers have notified up to 80 percent of policyholders that they’ll have to change plans.
Here’s a guide to help you understand the bigger picture, including why your premiums and benefits are likely to change next year and what you should consider as you shop for a new policy.
Why are these cancellations happening? The health care law targeted the so-called individual market because it didn’t work well for many people who don’t get coverage through employers, particularly those who were older or had health problems. The latter often were rejected for coverage, were charged more or had their conditions excluded from coverage. Some policies provided only the barest of coverage when someone did fall ill.
Starting Jan. 1, insurers no longer can reject people who are sick or charge them more than the healthy under the Affordable Care Act. They also must beef up policies to meet minimum standards and must add benefits such as prescription drug coverage, maternity care and mental health services.
If you got a cancellation notice, most likely your plan didn’t meet all the new standards. Some policies that fail to meet the law’s standards may still be sold if the insurer decides to continue them and if they’re “grandfathered,” meaning that you purchased one before March 2010 and neither you nor the insurer has made any substantial change since then. Adjusting an annual deductible, which many people do each year to keep premiums down, is a change that could end grandfathered status.
How are insurers picking the policies to discontinue? Some consumers fear they’re being targeted because they’re unhealthy or otherwise unprofitable for an insurance company. But insurers say they’re ending policies that don’t meet the law’s standards or weren’t grandfathered.
My insurer says that if I renew before the end of the year, I can keep my current plan. What does this mean? In some states, insurers are offering selected policyholders a chance to “early renew,” meaning they may continue their existing plans through next year, even if they don’t meet all the law’s standards. If you choose this option, your premium might still go up, but the cause would be medical inflation, rather than the need to add benefits because of the health law. Not all states allow early renewals.
Why are premiums changing? Under the old rules, insurers could decide whether to accept you, and how much to charge, based on answers to dozens of medical questions. Starting Jan. 1, insurers no longer can charge women more than men, or reject people who are sick or charge them more. They’re also adding new benefits.
As they drew up the rates for 2014, insurance firms had to make educated guesses about how many customers would stay, how many new ones they would attract, and what the health conditions of those new members might be. Actuaries say that it is possible that older buyers or those who had above-average health problems may find their premiums going down. Younger or healthier people, on the other hand, may find premiums going up, sometimes sharply. Under the new rules, consumers “are not paying based on their own health status, but an average health status,” said Robert Cosway, an actuary with the consulting firm Milliman.
I’m healthy. Why do I have to pay for people who are sick? Except for a fortunate few, everyone is likely to develop some kind of health problem or face an accident sometime in his or her life. Policy experts and regulators say insurance works best when it spreads the risk across a large group of people. Your house may not burn down this year, but you pay for insurance coverage just in case.
What should I do now that I’ve received a cancellation notice? Experts say people should scrutinize the terms of their soon-to-be-discontinued policies and compare them with what new policies offer. The monthly premium is just one factor in cost. Also note the deductible. Is it per person? What’s the maximum deductible if two or more family members fall ill in the same year? Finally, note the annual out-of-pocket cap, which is the maximum you’d pay in deductibles and co-payments for medical care during the year. An independent broker can also show you plans from various carriers.
1. Take stock. Before you start reducing your credit card debt, know where you stand. A lot of people will say they’ve got a certain amount of debt, let’s say $10,000, when in reality, it’s $15,000 or $18,000. You’ll never hit your target if you don’t know where it is, so be brutally honest with yourself. Action plan: Write down the debt, and the interest rate, on every card you have.
2. Improve your rates. The quickest way to save big on your credit card bills is to negotiate a lower interest rate. If you can shave off even a percentage point or two, you can save hundreds of dollars as you pay off your debt. A simple phone call and a polite request may be all it takes. While your credit score will play a large role in whether or not you get a rate cut, it’s not the only factor. Every lender has their own approach to this issue. It never hurts to give it a shot. Action plan: Call up each credit card company and request lower interest rates.
3. Track your costs. Write down all your regular, committed expenses (mortgage, utilities, insurance, car payments, minimum credit card payments, phone, gym, cable, etc.), and track other variable expenses such as restaurant meals, entertainment and travel. This will serve as the foundation to your budget. Action plan: Study up to a year’s worth of credit card bills and bank statements to get an accurate sense of your monthly spending, and keep tracking your expenses with a notebook or financial software.
4. Create a budget. It’s time to take an ax to some of those expenses. The key is to be realistic: You’ll have to make some sacrifices, but you don’t need to live on bread and water. “Cutting back can be more effective than cutting out,” says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling, a leading accrediting agency for credit counseling firms. “It’s hard to adjust your lifestyle too dramatically, and often, little adjustments can add up to big savings.” Cutting out a single pizza dinner each week, ratcheting down your gold-plated cable plan and changing your thermostat by a few degrees can give you the jump start you need. Be sure to give yourself a bit of breathing room in your budget in case an unexpected expense pops up. Action plan: Write down three ways you can cut back immediately, and cancel or downgrade some services. Divide your monthly discretionary budget into weekly allotments so you’ll have a better handle on whether you’re staying on track.
5. Choose your payoff strategy. There are two common credit card payoff strategies. The first is to use any extra cash into the highest-interest card while paying the minimums on the others. A second strategy is to pay off your card with the lowest balance first while continuing to pay the minimums on the others. Though this is not the most cost-effective way to banish your debt, it’s the fastest way to eliminate debt on a single card, and it can be a psychological boost to eliminate a bill for good. Action Plan: Choose your strategy, then rank cards in the order you’ll pay them off.
6. Stash your plastic. Research has shown that people who chose to pay by credit card rather than cash, can spend twice as much than those who pay by cash. Action plan: Store your credit cards where you won’t have easy access to them, but don’t cancel them. Plan to pay in cash whenever possible.
7. Find your motivation and support. Create concrete goals to stay focused. Maybe getting rid of debt will allow you to save for a down payment on a house, go on a dream vacation or stop worrying about every bill that hits your mailbox. Action plan: Write down your goals and keep them near you. If you get tempted to overspend, take a look at them to remind yourself of the bigger picture.
8. Track your progress. While you don’t want to spend every day fretting over your bills, keep an eye on your spending. Revisit your progress every few months. You don’t want this to consume your life. It took you awhile to get into debt, and it’s going to take you awhile to get out of it. Action plan: Put reminders in your calendar to check up on your finances. Keep the page with your starting balances, and compare them to check your progress.