If my house is completely paid off, are there any disavantages with my situation?
Can someone sue me and take my house?
Are there issues with getting a new loan for a new house?
What problems may I run into, if any?
2006-07-03 10:16:19 · 10 answers · asked by Anonymous in Business & Finance ➔ Renting & Real Estate
You must pay property taxes, or else the state may be able to put your home up for auction. I don't think anyone can sue you and put you out of a home, but I think they can force you to sell and buy a cheaper house and put the difference toward whatever you owe them (at least I've heard of that happening). Getting a loan for a new house should be easy. Also, you will have to pay for the maintainance and repair of your home. Those are all the disadvantages I know of.
2006-07-03 10:23:54 · answer #1 · answered by anonymous 7 · 0⤊ 0⤋
Disadvantages? None that I can think of! Well, there are, but you're in a very good position anyway.
Let's see: No more mortgage payments! Money available for other things. Sounds good!
OK, but there is a downside, and you've already alluded to it. Now that your home is free and clear it would be much easier for someone who got a judgement against you to take it to settle the judgement. A few states exclude your "homestead" from such a taking -- TX is one for sure -- check with an attorney for the law in your state.
Even if your homestead isn't protected, that's what insurance is for. You should have enough liability insurance on your car to cover the value of your home and should consider a general liability rider on your homeowner's insurance to boost that to several times the value of your home. You'll probaby be surprised how cheap a $1 million liability rider can be and it's worth every penny for the peace of mind.
Now, don't forget that now that your mortgage is paid off, you will have to pay your taxes and insurance yourself. The tax district has probably been sending those bills to your mortgage company who paid the taxes out of your impound account. Ditto for your homeowner's insurance.
Make sure that the tax district and insurance company send the bills directly to you -- and make sure that you set aside enough each month to cover the bills when they come due.
You'll probably be able to get payments on your homeowner's insurance, but you probably won't be able to get payments on your real estate taxes unless you take out separate loan for that purpose.
Now that you own a home "free and clear" you'll have a much easier time getting a loan for a new home. You could even pledge the old home as security for a loan to buy a new home for your primary residence. This would shield your new home from foreclosure if you couldn't pay the note for any reason. You'd lose the old property of course, but you'd keep the roof over your head.
If you rent the old property out you'll get some very nice tax deductions while the tenant pays off the mortgate for you and you live in your nice new place free and clear!
2006-07-03 10:48:38 · answer #2 · answered by Bostonian In MO 7 · 0⤊ 0⤋
The only concern is being sued. Be sure to establish a homestead if your state allows it. See an attorney and inquire about a living trust or a family trust to shield you in case of a law suit. Another advantage of this is that public records will contain your trust name as the owner, not yours, so it will be more difficult to find your assets.
Buy home insurance as broad as possible but don't over-kill it, it'll be to expensive, rather get an umbrella policy. A 1 million policy is very cheap and it will cover you over and beyond your home insurance, car insurance, etc. If you get a judgment against you that exceeds your policy the umbrella will still cover you.
2006-07-03 12:44:59 · answer #3 · answered by madrax 3 · 0⤊ 0⤋
Don't ever take out an equity loan. start saving towards a second home.Start in a market that you wouldn't mind living in and rent it out for the income. Duplexes are good. don't buy until you have at least 20% down. Repos are cool too, Cya.
2006-07-03 10:28:21 · answer #4 · answered by huntrossville 2 · 0⤊ 0⤋
there is no disadvantage. pay it off as quick as possible, and then you can start using all that bread that's been going to the bank to save and invest. $1000 a month that you dont have to spend anymore? Imagine... quit paying the bank 5 or 6%.. let them pay you!
perpetual debt is not necessarily a way of life, but you can tell alot of other people think it is..
2006-07-03 10:34:27 · answer #5 · answered by kvuo 4 · 0⤊ 0⤋
Make sure you continue to pay your taxes!. Also, many states allow liens. If you fail to pay a creditor (car, credit card) the can file a lien against your house. If you ever try to sell the house, these liens must be paid first.
2006-07-03 10:20:30 · answer #6 · answered by Wendy 3 · 0⤊ 0⤋
Outright paying cash for a home says you're filthy rich....and that not only attracts the media, an entourage and bank officials....it also attracts the IRS--who are all too happy to overtax you fast.
2006-07-03 10:20:15 · answer #7 · answered by Mr. Wizard 7 · 0⤊ 0⤋
None but property taxes. Depends on the state you leave in. You will have complete equity in it. Only God knows what a day will bring.
2006-07-03 10:22:40 · answer #8 · answered by David 3 · 0⤊ 0⤋
No, you will have equity in the house and no more payments to make. It's all good.
2006-07-03 10:20:40 · answer #9 · answered by notyou311 7 · 0⤊ 0⤋
just make sure you have the insurance if somebody hurts themselves on your property, the only other thing will be the maintenance
2006-07-03 10:30:30 · answer #10 · answered by Anonymous · 0⤊ 0⤋