You bought the biggest home they said you could qualify for, taking advantage of low rates and creative financing. Who knew you could afford such a great house?
But now, several years later, your low interest rate has disappeared, and the adjustable-rate mortgage that seemed like a good idea keeps pushing your payments higher. Or perhaps you took out a fixed-rate mortgage with an inflated interest rate due to your super low down payment.
If all that isn't bad enough, instead of increasing in value, your home's market value appears to be slipping. You worry it's about to take a nosedive.
A recent survey found that 58% of Americans are concerned the real estate market will crash, that there will be a "housing bubble and price correction" by 2020. Eighty-three percent believe it's a good time to sell.
On the other hand, there are plenty of experts who contend that is wrong — a housing crash isn't imminent.
Rather than getting caught up with worry over the big picture or arguing about who's right and who's wrong, here are eight specific things you can do right now to make sure your personal housing bubble doesn't burst.
If you can afford your house payment, a falling market is not likely to hurt you, provided you're not planning to sell right now. Your home's market value is only a number on paper.
While you might be tempted to bail out, selling now might cause you to suffer a loss needlessly. Enjoy your home. Time has a way of righting a slumping market. If you can hang on to a home for five to 10 years or more, you improve your chances of riding out a downturn unscathed.
Interest rates are creeping upward. It may not be too late for you to refinance into a fixed-rate loan. Do it now. With a fixed-rate mortgage, you always know what to expect.
If your home has appreciated significantly in the past few years, you might be tempted to cash out the equity before you lose that gain in a potential market downturn. Don't do it. Equity appreciation is not money in the bank. Cashing out will widen your debt and increase your monthly payment. If that equity is money you really need for some other purpose, sell your home now, and downsize to a cheaper area. Otherwise, don't run the risk of falling into a trap where you end up owing more than the home is worth.
If you are in a position to target your mortgage more aggressively, step up your payments to reduce your principle quickly so you owe less than the property is worth.
WIDEN THE GAP
You need to maintain a healthy gap between your home's current market value — the amount it is worth to today — and the amount you owe. Never less than 20 percent is my advice. Concentrate on widening that gap now and you'll sail through any market downturn.
Even in a down market, your home will be more likely to stay at the top in its class when it reflects your pride of ownership. Keep the place well maintained.
While keeping abreast of your home's current market value is interesting, it is not nearly as important as your outstanding mortgage. That's the number that deserves your focus and full attention. Set a goal, and then create a realistic plan to pay off your mortgage so that one day you will own your home free and clear.
Every dollar you pay toward the principal right now will bring you one step closer to living rent-free for the rest of your life.
Mary invites questions, comments and tips at EverydayCheapskate.com, "Ask Mary a Question." This column will answer questions of general interest, but letters cannot be answered individually. Mary Hunt is the founder of Debt-Proof Living, a personal finance member website and the author of the book Debt-Proof Living, Revell 2014. To find out more about Mary visit the Creators Syndicate Web page at www.creators.com.
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