Article 1 (Give Me a Piggyback) Article 2 (Split Treatment Exchanges: "Use Two Tax Code Sections To Your Advantage") Article 3 (Seller Cold Feet -- What To Do When It Strikes!) Article 4 (Wall Street or Your Street - Where to Invest Your Money) Article 5 (What is Driving Condominium Prices?) Article 6 (What is a Home Inspection All About?)

Give Me a Piggyback By Eric Erickson, partner in Viking Mortgage Company. He has been helping homeowners and real estate investors close their mortgage transactions for the past 8 years. He can be reached at 1-888-738-3350. In the mortgage industry, jargon is created to quickly convey a financing concept. A new term that has been recently created is a "piggyback loan." What is a piggyback? A piggyback is when a borrower takes out two loans to purchase a property. Each loan is in a different lien position (1st mortgage & 2nd mortgage) and each has a different repayment term (i.e. interest rate and amortization period). The main reason the piggyback has been created is that many borrowers do not have 20% or more cash available for a down payment. Why does a 20% down payment matter? That is the threshold for private mortgage insurance (PMI). Generally when the loan to value (LTV) is greater than 80% PMI must be purchased as part of the loan closing. With a piggyback loan PMI is avoided at LTVs larger than 80%. Another reason for choosing a piggyback loan is to purchase a higher priced property with a smaller down payment than normally is required - this strategy is common with investors purchasing income properties. Therefore the 2nd mortgage - the piggyback - is really borrowing part of the down payment. Why would you want to get a piggyback? There are many reasons to apply for a piggyback. The first reason, as stated above, is to avoid paying PMI. PMI is not a tax-deductible expense while mortgage interest is a deduction. Also in many instances when a borrower has 5% to 10% for a down payment and you compare total monthly payments between a mortgage with PMI and a piggyback mortgage, the payments are very close. However, with a piggyback mortgage all the interest is tax deductible - which saves the borrower money on income taxes. Here is an example of how piggyback compares to a loan with PMI. Suppose you are buying a property for $200,000 and only have 5% for a down payment. You would normally apply for a loan amount of $190,000 with $10,000 as your down payment. On a 30-year fixed rate loan at 8.5% you would have a principal and interest (P&I) payment of $1,460.94. Since your loan to value is 95%, you will be required to purchase PMI at a cost of $123.50 a month. Therefore, on this traditional loan with PMI the total monthly payment is $1,584.44. Remember the piggyback is a combination of two loans. The first loan is based on 80% of the purchase price - $160,000. The second loan is based on 15% of the purchase price - $30,000. You are still borrowing the same aggregate amount of money - $190,000. The interest rate charged to you may or may not be different on the first mortgage. Many times when you do a piggyback with only a 5% down payment the first mortgage interest rate may be a little higher. Let's assume the rate for the 1st mortgage is a little higher at 8.75%. The second mortgage interest rate will be higher and for this example it will be10.5% fixed for fifteen years. The P&I payment on the 1st mortgage is $1,258.72 and the P&I on the 2nd mortgage is $331.62. The total payment on a piggyback is $1,590.34. You may say, "Why would I pay $9.90 more a month and get two loans?" The answer is that all the interest paid on the piggyback is tax deductible, which will manifest savings at tax time in hopefully a higher refund. Also the 2nd mortgage is on a faster repayment plan - 15 years instead of 30 - so you are building equity in your property at a faster rate. To sum things up, in most cases when buying a home with a low down payment a piggyback loan is more beneficial than a loan that has PMI. A lot of the time when comparing the total payments side by side the piggyback's payments are lower. Many investors who buy income producing property have found that using a piggyback loan helps them leverage their investment dollars. All in all, it makes sense to find out if a piggyback loan will work for you.

Split Treatment Exchanges: "Use Two Tax Code Sections To Your Advantage" By Robert HB Buckner, New England Division Manager for Asset Preservation, Inc., a subsidiary of Steward Title Company. Questions regarding exchanges can be directed to him at 877-845-1031 or hbbuckner@earthlink.net. ONE SALE - TWO TAX BREAKS! A property owner selling a duplex, triplex or quadriplex, where the owner lives in one unit and rents out the remaining units, can use two tax code sections and receive excellent tax advantages! The unit where the owner lives is considered their primary residence and can qualify for exclusion of capital gain taxes as described below under "IRC Section 121 - Benefits of Selling a Residence." The capital gain taxes associated with the remainder of the multi-family property can qualify for tax deferral by performing a 1031 tax deferred exchange on the rental units. All this is possible even though there is one buyer for the entire complex. §121- BENEFITS OF SELLING A RESIDENCE Tremendous tax benefits are available on the portion of the property considered the primary residence by the owners. The 1997 TAXPAYER RELIEF ACT provided homeowners significant tax advantages on what is considered their primary residence. Section 121 of the tax code allows a homeowner to exclude capital gain taxes if they meet the following requirements: -Couples filing a joint tax return can exclude up to $500,000 of the capital gain on the sale of their primary residence, and single filers can exclude up to $250,000. -The home must have been the primary residence of both spouses two of the last five years. -This exclusion is available every two years. §1031-BENEFITS OF EXCHANGING Section 1031 of the Internal Revenue Code allows an owner of property "held for productive use in a trade or business" or "held for investment" to exchange for another "like-kind" property and defer paying all capital gain taxes. The units in the complex that have been rented may qualify for tax deferral benefits. ALLOCATION ISSUES A good accountant is generally needed to determine the value allocated to the residence portion and to the remaining units held for investment. A tax professional may use factors such as the square footage or the quality and value of improvements to each unit in determining what percentage is considered the primary residence and what percentage is allocated to the exchange portion. EXCELLENT INVESTMENT OPPORTUNITIES In addition to acquiring new multi-unit properties, exchangers can acquire different types of investment properties. These include vacation rental properties, single family rentals, business properties, land, and even tenants in common interest in large investment grade properties with professional management in place.

Seller Cold Feet -- What To Do When It Strikes! By Jay McHugh, RE/MAX Affiliates, 2077 Centre Street, West Roxbury, MA. Questions should be directed to Jay at 617-323-5050 or faxed to 617-323-4040. E-mail JAYMCLB@aol.com or visit www.jaymchugh.com. You've done it. You've found a buyer to purchase your home. In fact, he's even signed the purchase agreement. All should be grand. Then it hits - a major case of seller's remorse. What should you do now? Call the buyer to back out of the sale? Before you make that "I've changed my mind" phone call and hear screaming on the other end of the line, evaluate the downstream effects of what could happen. Are you prepared to handle a "worst case scenario" of consequences? Let's evaluate what could happen if you do back out. First, realize that cold feet are the norm for both sellers and buyers. Usually this malady first hits buyers, in part because they're writing the check for the earnest money deposit, applying for the loan -- circumstances that focus on parting with money! Sellers, on the other hand, usually have their major case of cold feet when they go in search of a replacement home, make arrangements for moving and/or when they start to pack things up. Unfortunately, this may not be early in the sales transaction causing the Buyer's response to be anything but understanding. That's why it's important to know what recourse the buyer could have against you if the sale is not completed. Depending on how the purchase agreement is written, the buyer could sue you for specific performance. This means that the buyer would take you to court to force you to perform specifically as you agreed you would. In other words, sell the property to that buyer. Not only would you need to mount a legal defense, you could end up parting with the house after all. The buyer could also decide to sue you for costs and damages. Depending on what the buyer has done towards closing the sale (outlay of loan costs, money for moving arrangements, etc.) you might be responsible for reimbursing those costs to the buyer. Lastly, backing out of the sale could cause you costs of sale, even though you've decided not to sell. The listing agreement you signed with the real estate agent more than likely has a provision stating that if he/she finds you a "ready, willing, and able buyer" who makes an offer you accept, you could be responsible for paying the commission if you back out. When dealing with a case of seller's remorse, don't forget that your initial intention was to sell. If you back out now and later want to sell, you'll need to go through the entire marketing, waiting, negotiating, and closing process all over again. If nothing else, this dose of reality should help you complete the sale now in order to move on with your life!

Wall Street or Your Street - Where to Invest Your Money By Rick Fedele, President of Summit Mortgage, a mortgage company with offices in Boston?s Back Bay and Wakefield, MA. Summit Mortgage is an affiliate of Pacific Guarantee Mortgage Company (PGM), the largest mortgage broker in the United States with an annual volume in excess of $1 billion. PGM has more than 40 offices and 135 loan originators throughout the country, and brokers its loans to a network of more than 200 nationwide lenders. For additional information, please call (617) 859-0900. Few things are as unpredictable as the New England weather. Even fewer things are as unpredictable as the stock market. Today's fast-paced economy is constantly being flooded by dot-com startup companies and high technology innovators. Only a fraction of these ventures will prove fruitful for investors. So how do consumers know where to invest their money to guarantee a payoff? The answer is actually closer than most people realize. The fact of the matter is that there is no way to positively guarantee a successful stock investment. A nearly surefire way to achieve copious returns on an investment, however, is to take out a mortgage and purchase a house. This type of investment will not furnish overnight fortunes, but over the course of the mortgage the value of the real estate is almost sure to increase, despite any temporary market dips. Stocks can dwindle, fall and all but evaporate overnight. Houses and property will remain tangible investments that will not disappear in the blink of an eye. Having made the distinction between investing in stocks and mortgages, the remaining question is how to get the most out of your mortgage. A 30-year mortgage in 1970 for a $100,000 home purchase translates into a total of $164,000 in interest payments at an 8 percent rate. This is just interest, on top of the initial $100,000 investment. If this homeowner had contributed an additional $150/month toward reducing the mortgage, not only would he have saved $77,000 in interest, but the mortgage would have been paid off in 1988, 12 years ahead of schedule. To own a house outright and pay off a mortgage is a wonderful feeling even if achieving mortgage independence requires no small amount of financial preparation. With a little foresight and basic financial planning, saving money while paying a mortgage and raising kids is not only possible, but becoming a reality for a growing number of homeowners. Utilizing 401 (k) plans and electronic checking deductions from your accounts are some of the simple and effective ways to better manage your money, pay your bills, and chip away at that mortgage. The bottom line is that it is very easy to get caught up in the fast-paced investment frenzy of our current economy. However, it is even easier to lose that precious investment when you gamble with the stock market. Mortgages and homes do take some time and discipline to see a payoff, but the odds are much more in favor of success on your own street, rather than on Wall Street.

What is Driving Condominium Prices? By Selma Newburgh, MBA, Architect, Realtor - Coldwell Banker-Hunneman, 1375 Beacon Street, Brookline, MA 02446. She can be reached at (617) 731-2447 or via e-mail at san@world.std.com. Visit her web site at www.selmasellshouses.com. Since the mid 1990's market rents and single family home prices in Greater Boston have been rising steadily. In response, condominiums are becoming the preferred form of housing. Traditionally seen as starter homes or housing for down-sizing empty nesters, condominiums are now marketed as single family alternatives. Price appreciation is especially notable in locations enjoying good public transportation and a reputation for good schools. The Brookline, Newton, Needham corridor is a good example. During 1995-1999, median price appreciation of single family homes sold in Brookline averaged 12 percent per year, in Newton 13.32 percent per year and in Needham 8.91 percent per year. Condominiums prices have kept pace, but at a lower rate. Average median price appreciation of condominiums sold in this same period has been 11.9 percent per year in Brookline, 10.57 percent per year in Newton and 6.06 percent per year in Needham. (MLS and Banker & Tradesman Records) This year, from January 1 through June 13, we can observe a change. While single family home prices have continued their climb, condominium prices have increased at a faster rate. In Brookline, the median price of single family houses grew by 19 percent-while condominium median price increased by 26 percent to $307,000. In Newton, single family median price rose 8 percent-and condominium median price grew 18 percent to $325,000. And, in Needham, single family median price grew by 13 percent while condominium median price increased by 78 percent to $364,000. What is causing this reversal in comparative growth rate? Very likely, more buyers are choosing condominiums over single family homes. Larger and more elegantly appointed condominiums, mainly townhouse style and 3-plus-bedroom units , dominate this market. During 1995-1999, 127 townhouse condominiums were sold in Brookline, 77 percent of these being sold in Brookline, 78 percent being sold during 1997-1999-the last two years. And in Needham, 38 townhouse condominiums were sold in the last five years-76 percent being sold in the last two years. Let us look at 3-plus-bedroom condominium sales. In 1999, in Brookline, 4 percent of all condominiums sold had 3 or more bedrooms. This year, through June 13, 34 percent of condominiums sold had 3-plus-bedrooms. In Newton, 15 percent of condominiums sold in 1999 and 44 percent of all condominiums sold in 2000 to date had three or more bedrooms. And in Needham, 72 percent of condominiums sold in 1999 and 67 percent of all condominiums sold this year to date have three or more bedrooms. Larger and more luxurious condominiums are now sold as single family home alternatives in inner urban areas as well as in suburban locations. Thus, prices are escalating at a faster rate. With all due respect to Mies Van Der Rohe-the famous architect who said "Less is More"-in this case "More is More!"

What is a Home Inspection All About? By Steven Petitpas, NCARB, ACSE, Aesthetic Images Homes Inspection Division, 617-323-4955. He is a Boston based registered architect who also performs home inspections. He has over 20 years of experience in residential and commercial construction and is also a licensed builder. He is an active member of the National Council of Architectural Registration Board and American Society of Civil Engineers. You make an offer on a house with a deposit to show your sincerity. If that offer is accepted, you now have seven to ten days to sign a purchase and sales agreement or you lose your deposit. The home inspection needs to be performed after your offer is accepted but before you sign the purchase and sales agreement. If you're a smart buyer, you make your offer contingent on the inspection, so that the sale becomes void if anything wrong is discovered or if you cannot come to an agreement on the cost of repairs or a negotiated lesser amount for the house. Once you sign the purchase and sales agreement, you've basically agreed to buy the house as agreed upon, pending financing. Without a home inspection it's like agreeing to buy the house sight unseen. Every home buyer should have their prospective purchase inspected by a knowledgeable home inspector who is experienced in current building codes and practices. A basic home inspection for a single family house should take on average two hours and should contain a visual inspection of all building systems and components contained within the house itself, such as the structural, plumbing, electrical, heating, exterior finish, and roof systems. There are literally hundreds of items your home inspector should be looking at. It takes someone with specialized knowledge to be able to inspect a house. A basic home inspection is not the only inspection you should have done prior to the purchase of a home. Every home should also have a termite inspection and, if small children are going to be living in the home, a lead paint inspection. Termite and lead paint inspections should only be performed by licensed inspectors because these types of services are regulated by the state. Beware of any individual inspector who says that those types of inspections are part of their basic inspection service. It is next to impossible to perform these multiple inspections with only one inspector. Most good inspectors associate themselves with specialty inspectors and may be able to coordinate these other inspections for you for a small additional cost. The basic home inspection along with the termite and lead paint inspections may tell you all you need to know about the conditions of your potential new home. If you're spending two to three hundred thousand dollars for your new home, you should be prepared to spend at least $250 for the basic home inspection and $125 each for lead paint and termite inspections. A good inspection company should be able to package and coordinate all three inspections for you. Even newly constructed homes should be thoroughly inspected. Newly constructed homes may have the additional problems of not being completely finished. I once inspected a new townhouse in a large complex, only to find that the false chimney flue on the roof was open to the weather and was directly over the master bedroom closet. I pointed out to the builder, who happened to be on the building site that day to collect his final payment, that hundreds of dollars of clothing might be damaged by rain water entering the false flue above. He promptly ordered his men to quickly seal all 100 plus false chimney flues in the complex. Starting in May of 2001, all home inspectors must be licensed. However, to date the only requirement in Massachusetts for home inspectors is that they can spell "home inspection." Even though someone may be qualified to join national associations and organizations for home inspectors, this does not necessarily mean that they are qualified to perform building inspections. There is no substitute for an opinion by someone who is actively involved in the building industry such as a licensed builder, registered architect, or professional engineer. Only these professionals are regulated and licensed by the state to protect public safety and welfare; the ordinary home inspector is not regulated in this manner. There is little recourse that can be taken if the inspector makes a mistake. Be certain that your inspector is qualified. A good home inspector can tell a lot about a building by observing the conditions of the house. Experience tells the inspector whether problems exist in the house. Building codes have changed over the years and even though existing buildings do not have to comply with current codes unless altered, certain building standards have been abolished. Your home inspector should be able to tell you if your new home contains such outdated standards and inform you of the current requirements. That information alone is worth the price of the inspection.