banker question....or for anyone smarter than me!

[vwboomer]

So Until I can try to meet with a bank type person this week, maybe someone can answer a question regarding equity in housing.
Is equity based solely on assessments by the city, or does it go off fair market value?
We currently owe 70k on the house. It's assessed value is 85k. FMV is given on the tax report as being about 95k. If a realtor sells  the house  for 100, we'd each get 15k (-fees).
I have 15k currently that I could use as a down payment, but if I have to pay her 15k, I won't have that down payment. So, does equity count for a down payment? I'm thinking the loan would be for about 70 to pay off the existing loan, which leaves me still 15k under the assessed value.

From a cash standpoint, I would probably be better off trying to sell the house on the market. IF I could walk away with 15k I'd be doing well. I've got maybe 7k invested in improvements, plus my time. She's paid house payments and I've paid utilities, done the labor, and paid for most projects. So while that might give me a 30k downpayment on a different house, this one has all new windows, a new kitchen, bathroom, barroom, and 1 other br redone. I put in a tankless water heater last year, and the roof is 6 years old. We had CA and 200amp service installed when we moved in.

So it really makes sense to do everything possible to stay here. I could get a smaller house (this is 4br 2ba 1800sqft) with some improvements, but anything under 100k I'm seeing a lot of work needing to be done. The only way it would work though is if equity counts as a down payment. Not holding my breath though.

I could add that when she/we bought, the price was 81,500, and the assessed value was somewhere around 70 if that helps anything.

[cyrus buelton]

I am not really sure what you are asking here.......

Assessed Value has nothing to do with equity you have in your house. That is something the county uses to assess your house in regards to property taxes. It also has to do with the appraisal of the house, but nothing really on the loan side.


Equity is what you have paid into the mortgage, not interest, but the principal.


You would have to contact the owner of your loan to see how much equity you have in the house.

[herm]

I am not really sure what you are asking here.......

Assessed Value has nothing to do with equity you have in your house. That is something the county uses to assess your house in regards to property taxes. It also has to do with the appraisal of the house, but nothing really on the loan side.


Equity is what you have paid into the mortgage, not interest, but the principal.


You would have to contact the owner of your loan to see how much equity you have in the house.

i think it is incorrect to imply that equity is however much of your mortgage you have payed off. that would not account for any down payment you made when you purchased. i think that equity is whatever amount of the total value of the property is free of any debt. if you have a mortgage for 70,000 dollars on a home that has a market value of 100,000 dollars then you have 30,000 in equity.

[derby]

i think it is incorrect to imply that equity is however much of your mortgage you have payed off. that would not account for any down payment you made when you purchased. i think that equity is whatever amount of the total value of the property is free of any debt. if you have a mortgage for 70,000 dollars on a home that has a market value of 100,000 dollars then you have 30,000 in equity.

correct... and if you have a 100k home that's dropped in value to 70k, you have negative equity no matter how much you've paid on your mortgage.

[herm]

correct... and if you have a 100k home that's dropped in value to 70k, you have negative equity no matter how much you've paid on your mortgage.

also correct, but less palatable........

[ducatiz]

Slight tangent, but why are you looking to sell now?

Home prices are the worst in history in some markets.  (Don't know where you are).  Unless you are paying some godawful mortgage rate or you have a balloon or adjustable that's about to wallop you, why sell?

If you don't have those situations and don't need a big house, how is the rental market in your area?  Could you rent the house out and move?  Rental rates are way up in many places (since mortgages are harder to get) and plenty of people are moving out and using their former home as rental income.

This works for many people because rents are usually much higher lately than home payments.  Moreover, if you are not reporting the income (I am not suggesting you do this) you can still claim the home as your residence and still get the tax deduction from the mortgage, while you rent elsewhere.

[T-byrd]

Slight tangent, but why are you looking to sell now?

Home prices are the worst in history in some markets.  (Don't know where you are).  Unless you are paying some godawful mortgage rate or you have a balloon or adjustable that's about to wallop you, why sell?

If you don't have those situations and don't need a big house, how is the rental market in your area?  Could you rent the house out and move?  Rental rates are way up in many places (since mortgages are harder to get) and plenty of people are moving out and using their former home as rental income.

This works for many people because rents are usually much higher lately than home payments.  Moreover, if you are not reporting the income (I am not suggesting you do this) you can still claim the home as your residence and still get the tax deduction from the mortgage, while you rent elsewhere.

Divorce.

T

[ducatiz]

Divorce.

T

Depending on the divorce, it might be better for both parties to agree to keep the house for a while.  This is not unheard of.

One couple (I bought their condo) had been divorced 11 years before selling.  They drew up an ownership agreement and hired an attorney to oversee the contract and pick a management company to rent out the condo.  It was an amicable divorce, to say the least.

They agreed that ownership was 50/50 and that everything in or out would be 50/50, etc.  Net result was they held it for 11 years getting rental income and then sold it for a $50k profit at a better time.

Like I said, now is an awful time to sell.

[T-byrd]

Depending on the divorce, it might be better for both parties to agree to keep the house for a while.  This is not unheard of.

One couple (I bought their condo) had been divorced 11 years before selling.  They drew up an ownership agreement and hired an attorney to oversee the contract and pick a management company to rent out the condo.  It was an amicable divorce, to say the least.

They agreed that ownership was 50/50 and that everything in or out would be 50/50, etc.  Net result was they held it for 11 years getting rental income and then sold it for a $50k profit at a better time.

Like I said, now is an awful time to sell.

That's how my ex-husband are doing it with our house.  I'm living in it and paying the mortgage, but since the market is crap refinancing it would be a HUGE!!! loss for the both of us.

We have to refinance or sell by next Aug., I'm hoping by then I could qualify to own it on my own and set him free for his credit.  We've agreed that when it is time to sell, that I would share any profits from the sale (if I can keep it).  It's hard to say how much, depending on how long I can stay of course.

We are still very close, and we still trust eachother to do right by eachother.  That's why it works for us, but we have a very rare friendship...post-divorce.

T

[ducatiz]

That's how my ex-husband are doing it with our house.  I'm living in it and paying the mortgage, but since the market is crap refinancing it would be a HUGE!!! loss for the both of us.

We have to refinance or sell by next Aug., I'm hoping by then I could qualify to own it on my own and set him free for his credit.  We've agreed that when it is time to sell, that I would share any profits from the sale (if I can keep it).  It's hard to say how much, depending on how long I can stay of course.

We are still very close, and we still trust eachother to do right by eachother.  That's why it works for us, but we have a very rare friendship...post-divorce.

T

Friendship is great, but in that situation, I would put everything on paper.  Spend a few hundred bucks at an attorney and have them draft something that you both understand and agree to.  It should specify all that you've said, and more, such as who will mediate disputes.  Point is, you don't know what will happen down the road and post-divorce is a touchy time for an ex-couple.  Selling a house which ends up in a windfall would be nice, but if you've put a ton of money into it, you should get an offset of the profits.  People get greedy.   

My parents' friends divorced and it was amicable.  They drifted apart after the kids grew up.  Basically, they never really settled with each other but stayed due to the kids (2) and made it work.  They divorced amicably and split everything fine.  2 years later, he was diagnosed with HIV, turned out he had a string of hookers all during their 22 year marriage.  She was diagnosed with HIV a year later.  Needless to say, I doubt it was a happy revelation for her.

[derby]

Depending on the divorce, it might be better for both parties to agree to keep the house for a while.  This is not unheard of.

One couple (I bought their condo) had been divorced 11 years before selling.  They drew up an ownership agreement and hired an attorney to oversee the contract and pick a management company to rent out the condo.  It was an amicable divorce, to say the least.

They agreed that ownership was 50/50 and that everything in or out would be 50/50, etc.  Net result was they held it for 11 years getting rental income and then sold it for a $50k profit at a better time.

Like I said, now is an awful time to sell.

you really need to read the backstory on this:

http://ducatimonsterworldwide.org/index.php?topic=2994.0

[ducatiz]

you really need to read the backstory on this:

http://ducatimonsterworldwide.org/index.php?topic=2994.0

uh, yeah, well that just gives him more bargaining leverage.

ouch.

still a bad time to sell.

broken heart and humiliation are one thing, money is another.  no reason to suffer financially.

but that's just me. 

[hbliam]

So Until I can try to meet with a bank type person this week, maybe someone can answer a question regarding equity in housing.
Is equity based solely on assessments by the city, or does it go off fair market value?
We currently owe 70k on the house. It's assessed value is 85k. FMV is given on the tax report as being about 95k. If a realtor sells  the house  for 100, we'd each get 15k (-fees).
I have 15k currently that I could use as a down payment, but if I have to pay her 15k, I won't have that down payment. So, does equity count for a down payment? I'm thinking the loan would be for about 70 to pay off the existing loan, which leaves me still 15k under the assessed value.

From a cash standpoint, I would probably be better off trying to sell the house on the market. IF I could walk away with 15k I'd be doing well. I've got maybe 7k invested in improvements, plus my time. She's paid house payments and I've paid utilities, done the labor, and paid for most projects. So while that might give me a 30k downpayment on a different house, this one has all new windows, a new kitchen, bathroom, barroom, and 1 other br redone. I put in a tankless water heater last year, and the roof is 6 years old. We had CA and 200amp service installed when we moved in.

So it really makes sense to do everything possible to stay here. I could get a smaller house (this is 4br 2ba 1800sqft) with some improvements, but anything under 100k I'm seeing a lot of work needing to be done. The only way it would work though is if equity counts as a down payment. Not holding my breath though.

I could add that when she/we bought, the price was 81,500, and the assessed value was somewhere around 70 if that helps anything.

I think I get what your asking. If you guys are still friendly contact a realtor and find out what the home would sell for. If not hire an appraiser. Then refi the loan for 85K and pay her the 15K (minus what closing and realtor fees would have been) to buy her out. Keep your other 15K in the bank. Or if it's simply to get her name off the home: If she's on the loan refi the 70K into your name and give her the cash you already have to buy her out. If she's not on the loan but is on the deed, give her the cash to buy her out and quit claim her off the deed.

[OwnyTony]

In short and as simply as i can put it, isn't equity basically the principle that you have paid off on the loan? 

To help the OP of the thread, when you get a new loan and start paying mortgage payments on them, most of what you are paying to the bank in your month to month mortgage payments are to pay off the interest of the loan.  So for example, If $1000 is the monthly mortgage payment, for the first 3/4 of the life of the loan, you are paying interest.  So of that $1000, $900 of it is to pay of the interest and $100 is the real amount of how much of the loan you have paid off. 

Of your payment, that $100 can be viewed as your "equity". 

equity has nothing to do with market prices, its how much of you house you have paid off. 

On a side note, you really start to "pay off" your house the last 2-3 of the life of the loan.  Its really rigged to the favor of the banks.

[derby]

In short and as simply as i can put it, isn't equity basically the principle that you have paid off on the loan? 

even simpler, it's the difference (positive or negative) between the value of the home and the current payoff of the mortgage.

equity has nothing to do with market prices, its how much of you house you have paid off. 

incorrect:

http://en.wikipedia.org/wiki/Ownership_equity#Real_Estate_equity

Individuals can also use market valuations to calculate equity in real estate. An owner refers to his or her equity in a property as the difference between the market price of a property and the liability attached to the property (mortgage or home equity loan).

http://en.wikipedia.org/wiki/Mortgage_loan#Equity_or_homeowner.27s_equity

The concept of equity in a property refers to the value of the property minus the outstanding debt, subject to the definition of the value of the property. Therefore, a borrower who owns a property whose estimated value is $400,000 but with outstanding mortgage loans of $300,000 is said to have homeowner's equity of $100,000.