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Various deeds convey different title guarantees


Q: Could you briefly describe and explain the different types of deeds that are currently used in Maryland?

Randy Gibbs, Reisterstown

A: There are three types of deeds generally used to convey property in Maryland:

1. Quitclaim deed -- transfers any title that the seller has. This deed gives no assurances that the title is good; the seller is giving to the buyer whatever title he may have. This deed is usually used to cure a title defect or convey title when the seller is unsure about the validity of title.

2. General warranty deed -- warrants that the title is free of any defects. The seller warrants to the purchaser that the title to the property is good from the beginning of time until the purchaser takes title.

3. Special warranty deed -- warrants that the seller did nothing during his ownership that would create a defect in the title to the property. This is the type of deed most often used in Maryland.

Q: I am getting ready to buy a home this summer. Do you recommend that I get a fixed rate or adjustable-rate mortgage (ARM)?

Arlene Ford, Columbia

A: The key questions are: How long do you plan to live in the home? And are you willing to risk rates going up?

The interest rate on the ARM -- though cheaper initially -- has a risk of rising, unlike the fixed-rate loan.

Most conventional ARMs have a lifetime cap of 6 percent and 2 percent a year -- that is, the interest rate on an ARM can rise 2 percent a year and 6 percent over the life of the loan.

The interest rate on an ARM -- after the introductory rate expires, usually after a year -- is based on an index rate, such as the one-year Treasury bill rate, plus a margin, normally 2.75 percent.

Explore other ARM products -- like a 5/1 or 7/1 ARM -- if you plan to live in this home more than six years. (These loans have fixed rates for five or seven years -- usually below 30-year fixed rates -- and then convert to an ARM.) You may not save as much money in the first years as with the one-year ARM, but you have less risk in the fourth or fifth years.

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