Home loan questions

Chip

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Jul 25, 2007
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I currently have a home loan in the DR with a cooperativa at 17% interest and am looking to refinance to get my house payment lower.

Question # 1: in the unlikely event of default on a home loan, does Dominican law allow the creditors to take the house without any recompensation to the homeowner for their equity?

Question #2: I can pay off the loan (around 25k) and get 9.2% with my credit card(unsecured personal loan), in the unlikely event of default, is their any likliehood that the American bank will be able to get a judgement against me and take my home here in the DR.

Thanks for the help. I don't plan on actually defaulting, but given the state of the economy I am planning for worst case. FYI, the best refinancing in the DR I can get in the DR will still be at 14% and I will have to pay US3000+ more than the credit card to get the loan(taxes and fees).
 

AK74

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Jun 18, 2007
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I have some answers only to part 2.

Credit card debt is UNsecured loan (unlike mortgage and auto loan) so the bank cannot confiscate your home for non-payment.

Another thing. Even if they decide to bring the case against you to the court, first they need to give you the summons (or notification) IN PERSON.

They can never do this as long as you are in Dominican Republic and all further proceedings stop automatically.

So, go ahead, have fun!!!

I currently have a home loan in the DR with a cooperativa at 17% interest and am looking to refinance to get my house payment lower.

Question # 1: in the unlikely event of default on a home loan, does Dominican law allow the creditors to take the house without any recompensation to the homeowner for their equity?

Question #2: I can pay off the loan (around 25k) and get 9.2% with my credit card(unsecured personal loan), in the unlikely event of default, is their any likliehood that the American bank will be able to get a judgement against me and take my home here in the DR.

Thanks for the help. I don't plan on actually defaulting, but given the state of the economy I am planning for worst case. FYI, the best refinancing in the DR I can get in the DR will still be at 14% and I will have to pay US3000+ more than the credit card to get the loan(taxes and fees).
 

Rocky

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Apr 4, 2002
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Question # 1: in the unlikely event of default on a home loan, does Dominican law allow the creditors to take the house without any recompensation to the homeowner for their equity?
Absolutely, unless you have some special contract that says otherwise.
 

playacaribe2

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Jan 9, 2004
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Concerning Question #2

I currently have a home loan in the DR with a cooperativa at 17% interest and am looking to refinance to get my house payment lower.

Question # 1: in the unlikely event of default on a home loan, does Dominican law allow the creditors to take the house without any recompensation to the homeowner for their equity?

Question #2: I can pay off the loan (around 25k) and get 9.2% with my credit card(unsecured personal loan), in the unlikely event of default, is their any likliehood that the American bank will be able to get a judgement against me and take my home here in the DR.

Thanks for the help. I don't plan on actually defaulting, but given the state of the economy I am planning for worst case. FYI, the best refinancing in the DR I can get in the DR will still be at 14% and I will have to pay US3000+ more than the credit card to get the loan(taxes and fees).


Assuming it is a U.S. credit card in your name only, the card company could and would proceed to get a judgment in the event of a default by you. Contrary to advice already given, you do not need to be served in person in all jurisdictions that I am familiar with. "Last and usual" address (address identified on your c.c. account) is sufficient for service to be accomplished. Once rendered, a judgment can be applied to any assets you may have (including D.R. real estate).

The likelihood of that happening has increased markedly in the last few years. As more people and assets have gone global, so too have the searches and seizures of those assets. That having been said, in your particular case, the creditor would have to weigh the costs vs. the benefits. That is, proceeding in the D.R. judicial system and expending the time and money necessary to recover on a 25,000 +/- default.

To answer your originally intended question, a couple of questons remain. Is your current home loan priced in dollars or pesos? Is it fixed or variable? What is the length of the loan?

If you are currently paying in dollars, then the credit card option appears to save you a great deal of money and would be the logical choice. However, if the loan is in pesos and at a fixed interest you need to weigh the likelihood of the peso returning to prior levels (or higher) not seen since the end of the Mejia presidency. In that scenario, a fixed peso loan might be a better choice.



Respectfully,
Playacaribe2
 

Chip

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However, if the loan is in pesos and at a fixed interest you need to weigh the likelihood of the peso returning to prior levels (or higher) not seen since the end of the Mejia presidency. In that scenario, a fixed peso loan might be a better choice.
The home loan is in pesos and I am currently paying around RD40k a month, and for this reason would like to lower it to around US1000 or less, not to mention the 17% interest rate.

Do you realy think the peso is going to devalue more in the next months/years?
 

playacaribe2

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Jan 9, 2004
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I wish I knew for sure...

The home loan is in pesos and I am currently paying around RD40k a month, and for this reason would like to lower it to around US1000 or less, not to mention the 17% interest rate.

Do you realy think the peso is going to devalue more in the next months/years?

how fast the peso will devalue. This may be subject to debate, but my best case is overall "real" inflation in the D.R. is currently running at low double digits and thus in March 2009 the peso will probably be at 41-42 per dollar.

With that in mind, and assuming you believe that scenario, you need to extrapolate the numbers over the life of your loan to determine if keeping the loan and letting inflation work for you is your best benefit, or whether going the credit card route would be better.

At a first look the credit card route seems like the logical choice, but depending on your loan length and type (fixed/variable) do not overlook the power of inflation.


Respectfully,
Playacaribe2
 

playacaribe2

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Jan 9, 2004
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Correction!

The correct future peso rate for my post above should be 37-38 per dollar.


Respectfully,
Playacaribe2
 

Chip

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how fast the peso will devalue. This may be subject to debate, but my best case is overall "real" inflation in the D.R. is currently running at low double digits and thus in March 2009 the peso will probably be at 41-42 per dollar.

With that in mind, and assuming you believe that scenario, you need to extrapolate the numbers over the life of your loan to determine if keeping the loan and letting inflation work for you is your best benefit, or whether going the credit card route would be better.

At a first look the credit card route seems like the logical choice, but depending on your loan length and type (fixed/variable) do not overlook the power of inflation.


Respectfully,
Playacaribe2
I apologize, I just remembered something important, my loan interest rate is not fixed, it will fluctuate with the dollar. Therefore, there is no advantage to have it remain in pesos.

FYI, this is standard practice here in the DR - in fact, I talked with Banco Leon, BHD, BVP, Banreservas, BP, Scotiabank, Banco San Cruz, Coop Cibao, etc. etc. etc. and they all said the same - the rates were "fixed" as long as the exchange rate doesn't fluctuate a "whole lot". I remember telling one loan officer than they really shouldn't advertize them as "fixed", whereupon he says "that is how it's done here", go figure.

Nonetheless, thanks for the help, and remember, there is no such thing as a fixed rate homeloan to be had(at least in cibao).
 

Chip

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The likelihood of that happening has increased markedly in the last few years. As more people and assets have gone global, so too have the searches and seizures of those assets. That having been said, in your particular case, the creditor would have to weigh the costs vs. the benefits. That is, proceeding in the D.R. judicial system and expending the time and money necessary to recover on a 25,000 +/- default.
My brother is an atorney, and he said pretty much the same thing, I was wondering if anybody had any real examples of this happening. Also, I am asking this question not becasue I expect to default, but just planning for the worst case scenario given that I work in the construction industry and things are quite slow now. It would be nice to know how difficult time and money wise the DR judicial process is to get a judgement.

In the event something happens and the banks realize it could be a problem getting a judgement, I could always do a chapter 17 and barter to have my payments reduced by giving me a longer term and/or lower interest rate.

thanks
 

Chip

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Absolutely, unless you have some special contract that says otherwise.
Wow, that is bad - all the equity lost. The loan I have is with the Coop San Jose and I have no idea what the small print says, but knowing the "Dominican way" as far as business goes, I figured it would all be to the banks advantage - this is another reason I really want to pay off this loan sooner rather than later.
 

playacaribe2

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Jan 9, 2004
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Chapter 13

My brother is an atorney, and he said pretty much the same thing, I was wondering if anybody had any real examples of this happening. Also, I am asking this question not becasue I expect to default, but just planning for the worst case scenario given that I work in the construction industry and things are quite slow now. It would be nice to know how difficult time and money wise the DR judicial process is to get a judgement.

In the event something happens and the banks realize it could be a problem getting a judgement, I could always do a chapter 17 and barter to have my payments reduced by giving me a longer term and/or lower interest rate.

thanks
I think you mean Chapter 13 of the US Bankruptcy Code. This does not change the terms of any loan, but rather allows you to repay your debts that are in arrears over a 3-5 year period.

Respectfully,
Playacaribe2
 

AK74

On Vacation!
Jun 18, 2007
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"Last and usual" address (address identified on your c.c. account) is sufficient for service to be accomplished. "

With all very high respect to the provided clarification, "last and usual"address does not equal the address that you gave the bank many years ago when you applied for a card. But a place where you actually live. And it is one of the biggest challenges to a creditor to find you on the planet. And even after that they must serve you IN PERSON, from hand to hand. Just dropping a letter in your mail box is not considered legally sufficient. It is a very first hand information, without further elaboration. So, for an American CC issuer to find a person who escaped to DR and to serve him - is an extremely tediouse costly and time consuming task. They will simply sell your debt to a collection agency and you know how to do business with it.

But of course, do not go default please. Be good and honest!

:chinese:

Assuming it is a U.S. credit card in your name only, the card company could and would proceed to get a judgment in the event of a default by you. Contrary to advice already given, you do not need to be served in person in all jurisdictions that I am familiar with. "Last and usual" address (address identified on your c.c. account) is sufficient for service to be accomplished. Once rendered, a judgment can be applied to any assets you may have (including D.R. real estate).

The likelihood of that happening has increased markedly in the last few years. As more people and assets have gone global, so too have the searches and seizures of those assets. That having been said, in your particular case, the creditor would have to weigh the costs vs. the benefits. That is, proceeding in the D.R. judicial system and expending the time and money necessary to recover on a 25,000 +/- default.

To answer your originally intended question, a couple of questons remain. Is your current home loan priced in dollars or pesos? Is it fixed or variable? What is the length of the loan?

If you are currently paying in dollars, then the credit card option appears to save you a great deal of money and would be the logical choice. However, if the loan is in pesos and at a fixed interest you need to weigh the likelihood of the peso returning to prior levels (or higher) not seen since the end of the Mejia presidency. In that scenario, a fixed peso loan might be a better choice.



Respectfully,
Playacaribe2
 

bob saunders

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Jan 1, 2002
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Not knowing your financial situation and whether you still have a bank account in the states, but could you open an unsercured line of credit in your US Account. Your interest would be no more than a couple of percentages above prime. I for example have an unsercured line of credit with my bank for 50K at prime plus 1.5 percent. I can pay just the interest or whatever i want to lower the balance.
 
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Chip

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Jul 25, 2007
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Not knowing your financial situation and whether you still have a bank account in the states, but could you open an unsercured line of credit in your US Account. Your interest would be no more than a couple of percentages above prime. I for example have an unsercured line of credit with my bank for 50K at prime plus 1.5 percent. I can pay just the interest or whatever i want to lower the balance.
Thanks - the actuality is that I have an unsecured line of credit from one bank up to 20k and the credit card up to 25k. I actually owe 45k but for simplicity sakes explained it as such. I would use both to satisfy my loan here and then pay them off at 9.2% and 10.99%, with the 10.99% being over 7 years and the 9.2% monthly payment at 3% of the principal balance. That make it somewhat difficult to calculate the principal and interest part of the payment, not to mention the term, but I do know that it ends up being less than what I am paying now monthly.
 

playacaribe2

Well-known member
Jan 9, 2004
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last and usual address

"Last and usual" address (address identified on your c.c. account) is sufficient for service to be accomplished. "

With all very high respect to the provided clarification, "last and usual"address does not equal the address that you gave the bank many years ago when you applied for a card. But a place where you actually live. And it is one of the biggest challenges to a creditor to find you on the planet. And even after that they must serve you IN PERSON, from hand to hand. Just dropping a letter in your mail box is not considered legally sufficient. It is a very first hand information, without further elaboration. So, for an American CC issuer to find a person who escaped to DR and to serve him - is an extremely tediouse costly and time consuming task. They will simply sell your debt to a collection agency and you know how to do business with it.

But of course, do not go default please. Be good and honest!

:chinese:

refers to the last address the credit company has on file for you. Your credit card agreement, that you presumably signed, indicates that if you move you will notify them of that change. So, if you do not notify them, your last and usual address is sufficient for service of a complaint. And, as I said, in the states that I am familiar with, IN PERSON service is not necessary. So checking the law of the jurisdiction you might default in would be a prudent course of action.

The one point we agree on is that pursuing a judgment debtor can be costly and time consuming. However, it can be done....even in the D.R.


Respectfully,
Playacaribe2
 

Adrian Bye

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Jul 7, 2002
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I did what you're talking about several years ago. I used the tacky "balance transfer" checks, got the money into my US checking account and then had a loan at around 4.5%. I paid it back a month or two later and it was very smooth - it was cheap money. The only catch was that I had to stop using that credit card for charges because they find ways to escalate the interest rate if you do.
 

ILLINIFAN

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Aug 23, 2007
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I did what you're talking about several years ago. I used the tacky "balance transfer" checks, got the money into my US checking account and then had a loan at around 4.5%. I paid it back a month or two later and it was very smooth - it was cheap money. The only catch was that I had to stop using that credit card for charges because they find ways to escalate the interest rate if you do.

I did a similar thing on a CC and believe me they don't need to find a way. Look at the agreement closely. They can increase your rate whenever they want to and they did on mine. The reason they gave was carrying a high balance. I had to get a personal loan at fixed rate to pay the CC in full and was right back where I started. If you plan on carrying the balance for any length of time you could be in for a shock. By the way my credit rating is excellent so that does not matter to them.