Should Traveling Trainee Buy or Rent?
while I’m what you might call a trainee--I’m going to be transferred every two or three years.
My wife and I think that our best bet is to go with an adjustable-rate mortgage for our first home because of the lower interest rate for the first year or two, although we prefer a fixed-rate mortgage. Does this seem like a good idea?
ANSWER: Choosing an ARM (adjustable-rate mortgage) is a good idea for the very reason you mention--the lower initial rate.
What might be an even better idea, though, is to scuttle the whole idea of home ownership until your life settles down. There are times when it makes much more sense to remain a renter.
Let’s face it, the odds on your coming out ahead, financially, having to buy, sell, pack up, move, unpack, buy, sell and pack up again every two or three years are so slim as to be invisible.
Even if your luck turns out to be blessed and you move from one good market to another good market--showing a slight appreciation in your house each time--you’ll need fantastic luck to break even.
I would squirrel away my money and play the landlord-tenant game until my employer lets me put down roots someplace.
Advantages When a Seller Holds Mortgage
Q: What are the advantages to sellers who carry back mortgages for the buyer?
A: The primary benefit is that offering to carry back a second mortgage may very well spell the difference between selling and not selling a home in a less-than-spirited market.
If you’ve got a credit-worthy would-be buyer who is shy of the 20% down payment that conventional lenders require, it makes perfectly good sense to carry back a part of that difference yourself rather than lose the sale.
The interest that you’ll receive will normally be slightly better than the interest on CDs or similar investments. A local title company can handle the paper work and the risk is minimal.
Carry the whole thing, yourself? There’s a lot to be said for that, too, although more safeguards will be needed--such as a more stringent credit check, private mortgage insurance and a lawyer on hand in the event that foreclosure becomes necessary.
But, again--if you don’t need the money out of the house in a lump sum--the yield on your equity is above market and the risk is minimal.
He Wants to Sell Half of Duplex as Condo
Q: I want to consider selling half my double (duplex) residence as a condominium. Will you please send me information that I will need to properly judge the pros and cons?
A: Technically, according to the Community Associations Institute--the nonprofit organization representing homeowners’ associations in the condominium, co-operative and townhouse fields--there’s no minimum number of units that can be included under the condominium form of ownership. But the question is, just how practical is it?
There are, of course, two- and four-unit condominiums scattered around, largely in resort areas, according to the CAI’s Judy Foster, but she could recall no case where the owner of a duplex went this route.
You’ve got to remember that there are a number of legal steps involved here--getting incorporated, for openers--and so your best bet is to query the state real estate board to find out what sort of licensing requirements are called for.
All sorts of questions revolving around practicality come to mind: You’re talking about a two-member homeowners’ association, for one thing, which means that it would be an impossibility to get a majority vote on any needed improvements to the property unless the two of you are in complete accord.
Generally speaking, Foster adds, a six-unit condo is normally considered the smallest practical size and the two-unit projects she is familiar with are not owner occupied.
But if you write her, explaining in more detail exactly what you have in mind, she’ll pass it on to the CAI’s legal staff for further research. Address your letter to Judy Foster, Community Associations Institute, 1423 Powhatan St., Suite 7, Alexandria, Va. 22314.
