- The Washington Times - Friday, September 12, 2008

Q. I have a 15-year fixed-rate mortgage with a balance of $54,000 and a rate of 6.5 percent. A friend said that if you have a 30-year mortgage and you make one extra payment per year, the loan would be reduced to 22 years. Two extra payments in the same year would reduce it to 15 years. Is there a way for me to reduce my mortgage balance using the same principle? Just curious; I would like to pay it off, but my loan officer evades my questions.

A. Anytime you send in an extra $100, in a separate check clearly marked “to be applied entirely to principal,” you are borrowing $100 less from then on, and you save $6.50 in interest every year. It’s like making a fixed-rate risk-free investment, guaranteed 6.5 percent return.

Then, if you continue making the same monthly payments, every year there will be an extra $6.50 that can go to reducing the principal even faster. The benefit compounds.

Yes, with a fixed-rate loan, making extra payments will reduce the time remaining. (An adjustable-rate mortgage would still go to the very end, but adjustments would be for lower payments than they would have been otherwise.)

With either type of loan, you would save on interest overall because you would be borrowing less than originally planned.

Q. What is the difference between a mortgage and a note? Is it possible to be on a mortgage but not on the note? If the house goes into foreclosure, would I be responsible for the money owed if I’m not on the note?

A. When you sign the note, you’re making a personal promise to repay the loan. When you sign the mortgage, you’re saying “and if I don’t do that, you can have my house sold to get your money back.”

If you’re not on the note, you’re not personally liable. You might lose the house if you didn’t make payments, but the lender couldn’t come after you for any shortfall.

There’s a catch, though: I don’t think a lender will give you the money if you aren’t willing to take responsibility for the debt. In rare situations, buyers take over an existing mortgage without assuming the loan personally. For normal mortgage lending, though, borrowers must sign both documents.

Q. My brother has a well-established business he would like to sell. I have had my real estate license for three years but have never listed any commercial property. My real estate office claims to handle all types of real estate transactions but has no commercial properties listed.

My brother told me he is going to list his business with an experienced commercial broker. I am somewhat upset. My brother also doesn’t want to list his business with my company because he is afraid word would get out that his business is for sale, as my company is local. Your advice would be appreciated.

A. Doing business within a family is a delicate matter. Look how you’re already feeling “somewhat upset.” Don’t risk your family’s harmony. Your brother will be better off with a company that’s experienced in commercial sales. Problems are sure to arise before it’s all settled, and you’ll be glad you stayed out of it.

Q. Our house has been on the market four months with no offers. We have lowered the price as far as we can. Our agent has had just two open houses. We are very disappointed with how things have gone and frustrated knowing there is not much we can do.

We signed a six-month contract with our agent and would love to be out of it.

A. Frankly, open houses don’t often result in sales. They’re useful mainly to show the seller that something is happening and to let the agent meet potential clients and customers.

If your house is multiple-listed so that lots of people know about it, the buying public is simply voting that you’re asking too much. It’s no use basing your price on “as far as we can go.” Buyers aren’t interested in your needs, but in their own. If something similar is on the market for less, of course they say to their agents, “Take me to that one.”

You always have the right to withdraw from an agency. Your listing contract is with the company, not with the particular salesperson, so you would want to discuss the matter with the managing broker in that office.

In the end, however, changing agents wouldn’t make up for an asking price that doesn’t attract attention. Anything will sell if the price is right.

  • Edith Lank will respond personally to any questions sent to her at 240 Hemingway Drive, Rochester, NY 14620 (please include a stamped return envelope), or readers may e-mail her at [email protected]

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