As I visit homes with clients we frequently come across hot water tank rentals. This is typical when in the city of Kingston. But more and more we are seeing Furnace & Air Conditioner rentals . This may become an issue when you sell or refinance your home. It may look like a convenient option for you and the most economical, but here is what you need to look out for.
Ensure that a lien is NOT PLACED on your home. Read your contracts. Make sure it does not have this or simular language …. “contract says the company has “the right to register a security interest” on the property and that the owner waives the right to get a copy of the registration.”
When I asked Chris Matthey, from The Mortgage Professionals about this…
“The tricky one is the financing programs out there when people buy a new furnace, AC, etc. When they draft up a loan agreement, often it is secured against the home.
In the case of a refinance, the providers of these financing programs have to be prepared to agree to postpone their registration / lien to allow the new mortgage lender to place their mortgage in first place. I have seen this declined in the past so the clients have no option but to pay them off.
The other issue here is not only does the postponement have to be agreed to with the provider of the financing for the furnace, but technically the lender putting their mortgage in first place (upon postponement) must agree to allow the 2nd mortgage back in place against the property behind their first mortgage.
In the case of a sale, these registered liens MUST be paid out through sale proceeds. So if someone is razor thin with sale proceeds (forgetting about the furnace / ac loan in second place) it could be the difference between having enough for down payment and closing costs on the new purchase and not.”
Isn’t this a Selling Feature?
Absolutely not!! In fact, many Buyers will not assume your contracts and you will be forced to pay them out.
Hot Water Tank Rentals
Hot Water Tanks are no exceptions. You want to understand if it is just a month-month rental which you can get out of at any time OR is this a contract. Many Buyers are not aware exactly what they are getting into until they want to change companies or maybe purchase one instead of renting one.
What you need to know BEFORE & AFTER YOU SIGN the dotted line!
- Ask questions!
- “How much does it cost for me to terminate this contract?” This one question could save you a world of pain down the road
- Ensure your contract clearly spells out what happens if you want to terminate the contract.
- Put that contract in a safe place for future reference.