Everyday Cheapskate: How to Stop Worrying That Your Housing Bubble Is About to Burst
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.Copyright 2019 Creators Syndicate Inc.