DEAR BOB: I have been unemployed almost 18 months and my unemployment payments evaporated recently. I’m burning through my savings at $3,000 per month. However, I have several hundred thousand dollars equity in my home. If I refinance, to lower my interest rate and take out some cash to live on, will refinancing trigger a property-tax reassessment? – Patrick K.
DEAR PATRICK: No. Refinancing should not trigger property-tax reassessment because a sale has not occurred.
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However, your problem will be finding a mortgage lender who will refinance while you are unemployed. If you can show prospects of going back to work soon, your current lender might refinance if you have a flawless on-time payment record.
Although some lenders offer “no doc” (meaning no documentation) home loans, they usually charge higher than normal interest rates. Shop around because not every lender will want to refinance your home mortgage while you are unemployed.
HOW LONG MUST LANDLORD LIVE IN RENTAL TO MAKE IT A HOME?
DEAR BOB: I own a condo that has been leased for 12 years. But my tenant is now moving out due to ill health. I am thinking of selling my current home, claiming that $250,000 tax exemption, and moving into the rental condo to make it my home. How long would I have to live in the condo before I could sell it and claim that $250,000 tax exemption again? – Olivia K.
DEAR OLIVIA: To be eligible for the principal residence sale tax exemption up to $250,000 (up to $250,000 for a qualified married couple filing jointly) Internal Revenue Code 121 requires you to have owned and occupied your home at least two of the five years before its sale.
Presuming you qualify, you can sell your current home now, claim the exemption up to $250,000, move into the condo, live in it for 24 months, and then sell it to use the $250,000 tax exemption again. This tax break can only be used once every 24 months so your timing will be perfect. For full details, please consult your tax adviser.
TENANTS IN COMMON IS A “BAD DEAL” FOR APARTMENT RESIDENT
DEAR BOB: I am considering buying a three-unit apartment building as tenants in common with two friends. We would each occupy one of the apartments. Do you think we need an attorney to draw up an agreement? – Philip G.
DEAR PHILIP: Absolutely, positively, yes. You need an experienced real estate attorney to prepare a tenants-in-common agreement, with occupancy rights, for you and your two friends.
But please be aware that you are undertaking many potential problems. What happens if one of the co-owners can’t pay their share of the mortgage, property taxes and other expenses? That means you and the other co-owner will have to increase your payments or risk losing the building by foreclosure. How do you foreclose and evict a co-owner? It’s not easy.
If possible, you and your friends would be much better off converting the three-unit apartment building into condominiums where each condo owner can have their individual mortgage. Selling a condo, when one owner wants to move out, is much easier than selling a one-third share of a tenant in common building.
The new Robert Bruss special report “Secrets of Tax-Free Reverse Mortgage Income for Senior Citizen Homeowners” is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com. Questions for this column are welcome at either address.
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