Unfortunately, many lenders are very slow to provide these documents because they have no financial incentive to do so promptly. For example, where I live lenders are supposed to clear the title within 21 days by state law after receiving the final payment. But I feel lucky if they do so within 60 to 90 days.
Be sure to follow up if you don't receive documentation within 60 days. This is very important because if the mortgage or deed of trust isn't cleared from your title now, when you later sell or refinance, it could be very difficult to get your lender to promptly clear your title then.
ONLY DEDUCT MORTGAGE INTEREST AND TAXES YOU PAID
DEAR BOB: I own a house with a friend. Both names are on the deed, but he no longer lives in the house (because my wife moved in). The entire mortgage payment is automatically deducted from my bank account. Can I claim the entire mortgage payment when I itemize my tax deductions? My friend doesn't care - Tim L.
DEAR TIM: Yes, you can deduct your mortgage interest and property taxes that you paid in 2005. Of course, the small principal portion of each mortgage payment is not deductible.
Although your friend still owns a share of the house, he isn't entitled to any mortgage interest or property tax deduction that he didn't pay.
However, a potential future problem could arise if your friend wants to sell the house but you don't want to sell. Legally, he can force a property sale in a partition lawsuit. That's why you might want to buy him out on a friendly basis as soon as possible. For more details, please consult your tax adviser and real estate attorney.
MUST MORTGAGE LENDER BE INFORMED ABOUT A LIVING TRUST?
DEAR BOB: My fiancé and I purchased a home together. The title is in my name since I paid the 10 percent down payment. He agreed to make the mortgage payments. We decided to create a revocable living trust with an amendment outlining our financial responsibilities. Is the mortgage lender considered our trustee, or how do we factor in the bank's ownership into our living trust? - Michelle S.
DEAR MICHELLE: You are a very financially savvy young lady. Most homeowners don't think about holding title in a revocable living trust until they are old and worried about avoiding probate costs and delays for their heirs.
The bank does not own your home. You do. However, because a lender holds a mortgage or deed of trust on your home, the lender is entitled to receive a copy of your revocable living trust.
Most borrowers don't bother to inform their mortgage lender when they transfer title into their living trust. But there is no harm in doing so. Frankly, the lender doesn't really care.
The lender is not the trustee of your living trust. You and your spouse are the original living trust trustors, beneficiaries, and trustees (presuming you add him to the title). However, the living trust document should name one or more successor trustees, such as a trusted relative, friend, or bank trust department.
The successor trustee takes over if you and your spouse (a) become incapacitated or (b) die at the same time, such as in a plane crash. For more details, please consult a local attorney specializing in living trusts.
WHAT HAPPENS WHEN THE LANDLORD DIES?
DEAR BOB: I rent a cottage behind my landlord's house for $500 per month. Unexpectedly, the landlord died last month. My friend, who was his girlfriend, moved in with him three months before he died. The death was sudden and unexpected. My friend and the landlord were talking marriage, but he did not change any legal documents to include her name. She is staying in the house. However, his siblings have told her not to touch anything. They reimbursed her for last month's mortgage payment and household expenses. No last will can be found. His name and that of his deceased mother are on the mortgage statement. He never married and has no children. He was 58 when he died. Does this situation require court probate? Can my friend make any claim to the property? Can his siblings throw me out or raise my rent? I continued paying my rent and giving it to my friend so she can pay the mortgage. But the siblings told her not to cash my check. Do I need legal advice? - Mary Ann V.
DEAR MARY ANN: Because your landlord died without a written will, his assets must be distributed by the Probate Court according to the state law of intestate succession. Presumably, his siblings will receive the assets if they are his closest living relatives.
The live-in girlfriend has no legal rights because she is not a relative and no will was found entitling her to any assets. She has no legal claim to any of his assets unless she can prove the deceased owed her money.
As for your tenancy, the siblings cannot evict you until they receive title from the probate court after the deceased's debts are paid. This can take six to 12 months or longer in most jurisdictions.
If I were in your situation, I would make my rent checks payable to the estate of the deceased and deliver them to the siblings or the attorney for the estate if one has been hired. Yes, you might want to consult a local real estate attorney.
SHOULD HOMEOWNER ASSOCIATION PRESIDENT TAKE SIDES IN DISPUTE?
DEAR BOB: I am president of our homeowner's association. Our CC&Rs (covenants, conditions and restrictions) state the monthly dues can be raised 20 percent per year and be cumulative. We recently had to raise them from $275 to $425 because we made our swim club part of the common area. But we have a small (less than 10 percent) vocal group who disapproved. They want to decrease the maximum annual percentage of dues increase to 10 percent and make it non-cumulative. We require a 75 percent vote to change the covenants. Do you think this is a good idea? - Terry H.
DEAR TERRY: If I were in your situation, as president of the homeowner's association, I would remain neutral on this issue. Let the vocal minority give it a try to change the CC&Rs. They will find out how difficult it is to get 75 percent approval. Personally, I think the 20 percent maximum dues increase is a bit high, but that's just my opinion.
The new Robert Bruss special report, "How to Earn Your First Profit When Buying Your Home or Investment Property Right," is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet PDF delivery at www.bobbruss.com. Questions for this column are welcome at either address.
