No Joint Tenancy In Alaska October 7, 2007 Correction: I received several protests over last week‟s issue. While Joint Tenancy remains an option for taking title in many States, it was repealed in Alaska in 1971. This means that your only option for sharing property, if you are not married, is Tenancy In Common. Under this legal status there is no right of survivorship. That is, if one party dies, his interest is not automatically transferred to the surviving partner. Each party‟s interest remains their own and, upon death, the Will determines what happens. In turn, this becomes subject to Probate. Married people take title as „Tenants by the Entirety‟, in which case the surviving partner does automatically receive the whole ownership without having to mess with Probate. You should also note that if you and an unmarried partner eventually do marry, then you may Quit Claim Deed your individual Common Tenancy rights to the both of you as Tenants by the Entirety. This will cost less than $100 at a Title Company. Sorry for any misinformation last week. I could say that I wasn‟t here in 1971, or that I don‟t agree that only married people should have this privilege, but the truth is I goofed in the publication. Half-Time Mortgage: Apparently, my lead question last week on shortening your mortgage payoff term aroused significant interest. I received so many questions from different people who were part way through their mortgage, with different situations, that it is not possible to answer every one in detail. Common threads arose in all the questions. First, you do not need your Lender‟s permission to add a principal reduction to any payment. If you want to put your Permanent Fund into shortening your mortgage term, and saving several thousands in interest, just do it. All lenders should provide a line in the monthly coupon for „Additional Principal‟. You can add $1 or you can add $100,000 to your monthly payment, and this will immediately reduce the interest portion of the following month‟s payment, and shorten the life of the loan. Some of you had problems with lenders in this regard. They misallocated your add-on to the payment and applied it to the escrow account for taxes and insurance. You will always experience more difficulties here if you are dealing with Out-of-State lenders and your loan was brokered through some less traditional sources than the well know names. Whoever your lender is, make it absolutely clear with your payment that the extra money is for Principal Reduction, then check the next month, either by telephone or on your monthly statement (if your receive one), that the money was correctly applied. The second theme of questions received this week was how do you calculate how much time and money you save by adding a particular amount to your monthly payment, say $200, as opposed to the „Half Time Mortgage‟ I described using an Amortization Schedule. The Math here is tricky, outside of a classroom, but you should fundamentally think of it this way. Take your current Principal balance – after all, that is the amount which you owe right now. Your mathematical question must exclude the taxes and insurance. So, you know where you are at in your loan – say, 7 years down the 30 year track. Your question is, if your current P&I payment amortizes your balance to zero over the remaining 13 years (156 months), what number of months would be required for that payment, with a $200 additional Principal reduction included, to bring your balance to zero. A good Realtor, or a kind Lender, or an enthusiastic College Professor, can make this calculation for you. Dear Dave: My wife and I are anticipating selling our home of 26 years in Ketchikan, and carrying the first mortgage with 20% down. Is there a danger of losing our equity if the buyer can‟t make the payments? Can a mortgage be written with protection in it? Answer: If you own your home outright, you can sell it with Owner Finance, just as you suggest. In this instance, you become the Lender in place of a regular lending institution. A deed of trust can be prepared through a Title Company and contain as much protection as you want. You can have the same protective provisions that a mortgage company would include. First this means that, should the buyer fail to make payments, you can foreclose on the buyer and regain title to your property. Also, be sure to insist that the Deed of Trust include a “Right to Sue on the Note” clause, which will enable you to sue the buyer based on the “promise to pay”, as well as your foreclosure rights. A Title company will not necessarily include this second protection unless it is specifically requested, and agreed to between the parties. A third defensive clause you should require is a “Due on Sale” clause which, in a nutshell, prevents the buyer from transferring title to yet another party who takes over the payments, without your written permission. As your questions involves legal issues, I also recommend that you obtain the advice of an Attorney. Owner Finance can provide benefits to both buyer and seller. Sellers can obtain a monthly income in the form of mortgage payments, usually at an above standard interest rate. Sellers can also sell property this way which would otherwise not qualify for financing. Buyers can purchase property, even if their credit or other issues prevent them from obtaining regular financing. However, an owner financed deal should only be entered into with full awareness of all its consequences. Approach with caution!