How much is enough?
Q: I am a self-employed high net worth individual with a family. We are planning on buying a new home but I am concerned about spending too much. What percentage of gross income do you recommend going towards your mortgage (please err on the side of conservatism.) Also, I am trying to understand how a higher mortgage interest will help reduce my taxes? -- T.
A: A conservative estimate is up to 28 percent of your monthly income for housing (including property taxes and insurance) and no more than 33 percent for all your debt service, including things like car payments or student loans.
The reasons for and against a high mortgage should depend on your financial situation and investment strategies. Forget the supposed tax benefits of a higher mortgage. It's never worth spending an extra dollar in interest just for a rebate of 28 or 33 cents in tax savings. Mentioning the land
Q: Can someone sell a house without the land? Do they have to mention they are also selling the land? -- K.
A: When you buy real estate, what you buy is land. Anything permanently attached --like a house -- comes with it. Deeds that transfer ownership seldom mention buildings anyhow.
Paying off the mortgage
Q: I keep copies of your column and saw a question just like mine once but of course now I can't find it. When I pay off my mortgage what do I need to do with the county or the mortgage company? Any documents I should have in hand after the payoff? -- K.R.
A: What you have in hand isn't as important as what's been entered in the county's public records. The lender owes you a certificate of satisfaction or, in some states, a reconveyance deed.
That document proves the debt has been completely paid. Often it is sent directly to your county's public records office, and forwarded to you later. If you receive the document, it may be stamped with the date it was recorded. Otherwise, take it down and put it on record yourself.
If you don't receive anything, wait a couple of months and then investigate. You can go to the records office, ask a lawyer to do it, or in many locations, search from home on your own computer.
If the records show the debt and don't show the payoff, contact your lender immediately, and keep at it until the matter is cleared up.
You should also receive any balance in your escrow account, if the lender was collecting money every month to pay your property tax and homeowner's insurance bills. Whatever is left is really yours, and should be returned. From then on you'll be paying those bills yourself.
Three easements
Q: What are easements and how do they affect the value of the property? Should I go ahead with the purchase? The property I am looking at has three easements. -- L.M.
A: An easement is someone else's permanent right to use your property for a specific purpose. It might be something like putting up a utility pole, sharing your driveway, or cutting across your side yard to get to a lake.
Easements continue even if property changes hands, so they would still be in force after you bought the place. Find out what those are for and decide for yourself if you can live with them.
Sold for full price
Q: I am buying a home soon in another town. I noticed that five of 13 houses sold there recently had the sale price equal the asking price. For a market that's supposed to be slow, could you give me an explanation? -- Via e-mail
A: Probably those sellers were well-motivated and well-advised and they priced their properties to sell promptly. It'd be interesting to see how short a time those houses were on the market.
Studies have shown that the longer a place lingers for sale, the bigger a discount it sells for. (The comparison used tax-assessment figures to eliminate individual sellers' different asking-price styles.)
An overpriced listing, even if it has later price reductions, wastes that large original pool of potential buyers.
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 ehlank@aol.com.
