The following column will appear regularly in the Washington Post Real Estate Section. It will answer questions by Washington area residents on home buying, ownership and rental tenancy.
Q: We recently purchased a house in the Washington metropolitans are. Shortly after moving in, we received a number of brochures from insurance companies suggesting that we purchase a mortgage life insurance policy.
What is this policy and do you recommend it?
A: If you die before your mortgage is paid off, a mortgage life insurance policy will pay your lender the remaining balance of that mortgage. As you know, the mortgage balance is reduced every year, and accordingly the coverage of such an insurance policy is constantly decreasing. Thus, if you are interested in having your mortgage paid off upon your death, you might want to consider increasing your own life insurance coverage instead. you may find that the cost for term (or even whole life) insurance will be considerably less than for mortgage life - and the coverage is greater.
You should also consider whether you really want you mortgage paid off in the event you die. There may be tax benefits or other considerations for keeping your mortgage. And don't forget - if you decide not to purchase mortgage life insurance, your house is still a valuable asset which can be sold after your death. Your mortgage will be paid off from the proceeds of the sale, and your family will still have the excess funds.
Q: I am selling my houses through a real estate agent using the multiple listing service. The house will be shown this weekend. If I get a number of contracts, do I ahve to accept the first one I receive or can I take my time to decide which is best for me?
A: When you are presented with a "contract," in reality it is only an offer. You can accept it, reject it or make a counter-offer. In order for a contract to be legally enforceable, there must be an offer, an acceptance and valuable consideration - such as money, or taking your house off the market. So it you are fortunate is receiving more than one "offer," count your blessings - but you can take your time in deciding which offer to accept. One note of caution: An offer can be withdrawn at any time prior to acceptance. some offers have built-in time limits whereby the offer is void unless accepted within a certain time. If you wait too long, you may lose the offer.
Q: In an earlier column, you reported that Maryland law requires a savings and loan association to pay passbook rate interest on all escrows held for taxes and insurance. When I asked my lender why they were not giving me interest. I was told that since I rented my house for a month prior to going to settlement, the Maryland law is not applicable. Who is right?
A: Needless to say, laws are subject to numberous opinions. As I read the 1974 Maryland law, if a bank or savings and loan lends you money for residential property, and the interest rate is more than 8 per cent, you must receive at least passbook interest rate on any tax or insurance monies escrowed by your lender. I would suggest that you discuss this further with your lender. He or she may reach a different conclusion once the law is re-read.
Benny L. Kass, a Washington attorney who specializes in real estate and consumer law, will answer questions sent to him in care of the Real Estate Section, The Washington Post, 1150 15th St. NW, Washington, D.C. 20071. Questions cannot be acknowledged and answer will be given only in this column.