Ask the grumpies: Estimate someone else’s mortgage payments?

Grad School Cautionary Tale asks:

Husband and I are trying to save for a house. He is a prof and was on leave this year. For various reasons, we were unable to buy a house this year as we had planned. For the next academic year, we need a place while we look for a house to buy.

A colleague in his dept. is on sabbatical next year. We thought we could rent that place, agreed on rent and we would pay utilities. Turns out there is oil heat and utilities are an extra 500. In trying to negotiate with the colleague, I’m trying to figure out their mortgage payment without asking to try and find a reasonable amount to pay. I have, from public records, sale price, year bought and term of loan. Is this something that I can figure out/estimate w/o knowing interest rate/down payment?

We are sort of stuck b/c at first colleague said ze didnt know what ze would do with the house while abroad. It is not a true rental in we would only be moving in our bed, have no storage space, and make no changes. We don’t want to be paying their phone and cable package though, and it seemed like we were doing each other a favor, (we house sit, pay some rent, live constrained for a year so we could save money, ze has someone they trust with their house/stuff, doesn’t have to move much). Now that i type it up, it sounds kinda crazy, but I think my original question of figuring out mortgage payment still stands.

Can you help with that?

Well, I think the best you could probably do would be to plug assumptions into online mortgage calculators and get a range.  Keep in mind that their mortgage payment is also likely to include property taxes and insurance.  I’d start by assuming that they put 20% down on whatever term mortgage you found and vary the interest rates.  You’ll end up with a range.

We have been on both sides of this furnished housing rental deal.  We paid fair rent for a furnished place for a year (we got a discount for asking and being a good risk, but paid extra for our cats, so it balanced out), and another family rented out our furnished house for that year and paid less than the going rate but still more than our mortgage.  (There was a glut of short-term professor rentals that year because of an overseas program– usually the short term rentals in our market go for a premium.)  I don’t think in either case we thought of it as doing a favor or having someone do us a favor.  There are still risks to having a family living in your house, just as there are risks to leaving it alone.

You can also see price ranges on sabbaticalhomes and academichomes.  Craigslist and whatever rental sites are used locally will tell you what unfurnished rentals go for in the area.  You can also contact a local realtor who specializes in rentals.

If you’re in the northeast, it isn’t unusual for a house to be oil heat.  Since the price did come as a shock, personally I’d just try asking for a discount off the rent because of it.  They may be willing to work with you.  People are often willing to come down in price for low-risk renters, regardless of ideas of fairness, especially for a short-term deal.  I’d suggest not even naming a number, but saying the cost of oil heat is a problem for you and letting them name a number– they may be willing to lower the rent by quite a bit.  (And if you don’t like their number, you can suggest a lower one.)  If you haven’t written up a contract yet, then feel free to walk away if you find something you like better.  (And do make sure you write up a contract eventually wherever you end up.)

Good luck!

Any wisdom to add, Grumpy Nation?

8 Responses to “Ask the grumpies: Estimate someone else’s mortgage payments?”

  1. plantingourpennies Says:

    If they want to be truly nosey, they could look up the public records databases. Mortgages are often recorded, so there’s a decent chance you’d be able to track down the initial balance and interest rate. You could also see if there’s a second mortgage, etc. You’d also be able to find tax bill records and could make a decent guesstimate on insurance costs based on the market value of the home.

    But the bigger question is – should that matter? What if you found out the prof had a giant mortgage and your rent estimate doesn’t even come close to paying it? Would you increase your offer on rent?

  2. Susan Says:

    And what if they do own their house outright — do they owe it to you for free?
    Would you treat the situation the same if this was a struggling grad student?
    I think it’s reasonable to approach the situation saying “we’re prepared to pay X” and go from there. But figuring out what you think they owe you as far as a deal goes is not such a good approach.

  3. chacha1 Says:

    Appreciate the note re: “write up a contract.” Handshake deals … to quote the narcoleptic Argentinean from Moulin Rouge, “it always ends BAD!”

  4. Perpetua Says:

    You should always write up a contract. There are versions online you can download and tweak. It needs to spell out the situation with rent, utilities, damage, and who will pay if there is a problem with the house. It is reasonable to ask for a deduction on the rest with such high utilities, and have it all worked out before you move in. I don’t think you need to find out their mortgage payment since you already agreed on rent. Presumably, you agreed on rent and utilities and then found out about the heat? (For future reference, asking about the average utilities when looking over a place is always a wise move, since they can vary so widely.) Then simply ask for a slight adjustment to the rent, or put a cap on the utility price. We rented once the other way where they factored the utilities (based on their monthly averages) into the rent, and we would pay if we ran over. It is very common to ask the owners to change their phone plan or cable package to suit your needs better, if you like/need less than what they do. We always requested changes like an overseas calling package (which we paid for, of course). If you are paying their bills, make sure you figure out a way to take into consider which companies bill you for the month *before* and which for the month of services given, so you can parse out whose bills belong to whom for the beginning and end of the rental period. (We have rented many many furnished houses, informally and through sabbatical homes. A contract with a begin and end date is a must.)

  5. MutantSupermodel Says:

    I’m with the first two comments re: their mortgage shouldn’t matter to you when negotiating. Fair Market Value should. Craigslist should offer comparable rents in the area right? Or other renting websites?

  6. academiccautionarytale Says:

    Thanks for your reply, grumpies! A few things… this is a weird situation b/c it’s a colleague/friend. Heat is 500 alone, plus extra utilities. Price we initially agreed on (well husband did, he is not a negotiator, more of an agree-er) for the area is above market value based on craigslist/local uni lists.

    @plantingourpennies: knowing the mortgage price would not affect how much we could pay, ie offer to pay more, with out current budget. But if ze is paying a ton, we would not negotiate for less and if we determined the price was too high for us to pay, let ze know so ze could try to find another renter.

    @susan: that is not the case, as we know as we are friends. we are not trying to get a deal, we were offered to house-sit/rent, but did not anticipate the rent/utilities to be so high, as person was literally going to either have us house-sit or lock up the house and hope for the best. to be clear, we did not expect anything free!

  7. Revanche Says:

    I would check rental comps in the area too. That’s how I get an idea of what people would reasonably expect to pay if we were to move out and list our home as a rental. This is important to us because I need to know if it’s worth it to rent and FMV will dictate whether we’d be taking a loss or not. As it turned out, a friendly neighbor eventually told us what he was paying in rent and it was very comparable to covering our cost and the other rentals on the market so that was reassuring.
    Whether they owed more or owned outright wouldn’t matter to me so much as if it was around FMV and that it fit my budget. Hope you reach a consensus.

  8. Shannon Says:

    We were away for a year on sabbaticals and rented our house to a colleague and her husband. We charged them WAY less than our mortgage (and even less than comparable rentals in the area) because they were really doing us a favor, particularly since they agreed to watch our cats. But even without cats, It is NOT good to leave a house sitting vacant for a year because stuff happens and you want someone there to deal with it. For example, we lost a major tree in our yard during a storm; our tenants were able to contact a tree removal service for us and get it taken care of – something that would have been FAR more difficult from halfway around the world, if we had even known about it. Without you, your colleague is either going to have to rent the house to someone else or let it sit vacant – both undesirable compared to your renting hte house. So I think you have more leverage than you think you do. Finally, if you do rent the place, PLEASE get a contract/rental agreement. We did that with our renters – specifying who was in charge of what, when we expected payment, etc. etc. We never had to use it, but if things do go south, you need that to protect yourself.

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