Recent News and Articles on the Keywords: questions + rate + homeowner  Related to the article below (Last Update: 8/7/2008)

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Homeowner questions 'free' rate reduction

Q: Our mortgage company recently sent us a letter telling us we qualify for a free interest-rate reduction due to our good payment history. However, when I followed up, I learned we'd be charged $350 each in underwriting and settlement closing fees, plus $400 for title insurance. This doesn't sound free to me. Are these charges normal?

A: Chuck Cross, acting director of the Division of Consumer Services of the Washington State Department of Financial Institutions, is OK with the settlement-closing and title-insurance fees. Both are customary ones and are paid to other firms — not your lender — during any mortgage transaction. "Even an underwriting fee is a legitimate fee, but technically the deal isn't free if you're paying that," Cross says. "The word 'free' is used to entice you in. Free doesn't exist, at least in the mortgage business."

Before you agree to any refinance or interest-rate reduction, Cross advises you to comparison-shop among lenders. Look particularly at the total cost of the loan. As he points out, paying low fees and no points is no deal if you end up with a higher interest rate than you qualify for. Indeed, "the lender would profit incredibly," if, for example, you were offered a new, lower interest rate of 7 percent, but qualified for 6 percent instead.

Q: The entire plumbing system in Mom's condo building had to be replaced last summer. That meant the workmen had to tear out the part of her ceiling that also held a radiant heating system. Many months later, the ceiling is still torn up because management says it can't find anyone to restore that system. What can Mom do to get her ceiling back in order? Should she stop paying all or part of her assessment?

A: "While it's understandable she'd want to withhold her dues under the circumstances, it's not legally justified," says Bellingham attorney Hugh Lewis. That's because condos have written rules prohibiting withholding dues, so if your mom does so, she'd likely get socked with fines and still owe the original amount.

Your mother also cannot simply repair the problem and deduct the cost from her dues. That's something tenants can do because landlord-tenant law allows it. But since she's an owner, that law doesn't apply to her.

So here's how Lewis breaks down the issue: Condos usually come with a written easement granting the association access through all the owners' units to perform repairs or maintenance on commonly held portions of the building. Plumbing is one of them. "If there's damage caused to the unit by the association's contractors, it's the association's responsibility to repair the damage. The real issue is that management is not addressing this as quickly as it should. They can't continue to ignore this."

Because there's no easy way to make the association take action, Lewis says your mom's best bet is probably to hire an attorney to review her condo documents, then write a demand letter to the condo board and management company. "The fact that they haven't found someone to repair it yet doesn't mean they can't be prodded. The only way for her to break this impasse is to get herself an attorney."

Q: I'm young, single and do not have a permanent career or own my own house yet. But I'd like to buy a house and rent it to my brother, who's autistic and qualifies for Section 8 federal rental assistance. My parents are willing to assume landlord duties. Does this seem like a good investment opportunity for me?

A: In the absence of more information, there's no easy answer to your question. What Seattle attorney Benjamin Porter, of Porter, Kohli & LeMaster, can suggest is that you separate the two issues. "The investment decision should be made on the basis of what's the highest return you can get for your investment dollars, and the brother's care should be made on the basis of what's best for him and for your parents."

Here are some of the many questions he suggests you ask yourself: Will your brother's rental assistance cover your mortgage, property taxes and insurance plus maintenance costs? There's a good chance it won't, and then who pays the difference? What happens in the future if your parents can't or won't act as landlords? What happens if you decide you want to invest that money elsewhere — or simply need it yourself? Would you be willing to move your brother elsewhere? As Porter points out, you might be comfortable doing this, particularly if you can't care for him, but your parents might have an entirely different view of the matter.

Porter says there are a number of other housing options worth considering for your brother. They include adult family homes, boarding homes and nursing homes. The state's Aging and Disability Services Administration has a Web site — www.aasa.dshs.wa.gov — that describes these facilities and helps you locate them.