DEAR BOB: Two years ago my partner and I bought a condo together. I paid the entire down payment and we have split the mortgage payments, condo fees and property taxes since then. However, he recently moved out and says he wants his half of the equity (which I figure is around $45,000). I don’t have that kind of money to buy him out. Nor will I be able to pay the expenses on my own. Can he force the sale of our condo? –Tamara Y.
DEAR TAMARA: If both names are on the title, the answer is yes. Your ex-partner can bring a partition lawsuit to force the sale of the condo with a split of the sales proceeds. However, if his name is not on the title, he can’t bring a partition lawsuit.
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You will need to hire a real estate attorney if he sues for partition so your interests can be protected. Because you paid the down payment, your attorney will make certain you receive that amount before the sales proceeds are divided.
A partition sale is a possibility whenever two or more individuals take title to real estate together. For this reason, it is wise to consider other forms of co-ownership, such as a partnership agreement, which prohibits a partition lawsuit.
WHY PAY PMI (PRIVATE MORTGAGE INSURANCE) FEE UP FRONT?
DEAR BOB: I recently heard financial adviser Suze Orman suggest that a home buyer can pay upfront for his/her PMI premiums by paying 1 percent of each $100,000 of the mortgage. She says most mortgage lenders don’t explain this. Is this true? –Tany A.
DEAR TANY: PMI premiums can be prepaid, but why in the world would you want to do that unless you receive a huge discount?
It makes no sense to prepay PMI, especially since PMI fees are not tax deductible (although Congress is considering making them deductible like mortgage interest). Another reason not to prepay PMI is you might sell the property and pay off the PMI mortgage, or you could pay down the mortgage balance to get the PMI premiums removed.
IF YOUR NAME IS ON THE TITLE, DEDUCT MORTGAGE INTEREST YOU PAY
DEAR BOB: Last year my mom quitclaimed her house title to herself and me. She recently lost her job and I started paying her mortgage. After my name was added to her title, I got married. My wife and I are now paying the mortgage. Can I add my wife’s name to the title so title will be held by my mom, my wife and me? –Kevin K.
DEAR KEVIN: If your name is already on the title to the house, you can then deduct the mortgage interest and property taxes you pay on that property.
Why complicate things by adding your wife to the title? In some states, such as California, that could cause a partial property tax reassessment.
I don’t see any advantage — only several disadvantages — of adding your wife’s name to the title. The mortgage interest and property taxes you pay will still be deductible on your joint tax return because you are legally obligated to make those payments. For full details, please consult your tax adviser.
The new Robert Bruss special report, “How to Buy Fixer-Upper Houses with Little or No Cash for Fun and Fortune,” 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 delivery at www.BobBruss.com. Questions for this column are welcome at either address.
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