Archive for the 'Surviving During a MORTGAGE MELTDOWN' Category
Refinance Your California Real Estate Before Values Go Any Lower
May 14th, 2008 categories: Mortgage Strategies, Protecting Yourself in a DECLINING VALUES Market, Smarter Ways to REFINANCE, Surviving During a MORTGAGE MELTDOWN
First, let’s wipe the slate clean. Repeat after me: It isn’t always about RATE. Sometimes its about liquidity. Sometimes its about security. Sometimes its about survival.
Are you guilty of thinking like this when it comes to a future refinance? Mortgage RATES are something I can wrap my arms around. Mortgage RATES are numbers I understand. Mortgage RATES are why have decided to refinance. Therefore, I have decided I will adopt the following mantra:
I will WAIT for the RATE to go down. “Call me when it drops to 5.25%, see ya!”
But there is a silent killer lurking in the background with the ability to blow your refinance to smithereens. It doesn’t attack the rate, so you never see it coming. It attacks liquidity, security, and your ability to survive.
While you were watching the rate, everything else was left exposed and vulnerable.
Month by month, your house became worth a little less as bank owned properties bled the economy and played havoc with property values here in California. You read about it in the newspaper, but figured it could never happen to you.
While you were watching RATES, your equity disappeared.
What does this have to do with a refinance? Everything. You need equity to refinance. If you lose enough equity that the appraised price is close to, or equal to the amount you owe, you just shot yourself in the foot.
Please note the word “appraised value” which is different from “your opinion” of the price or “potential selling price”. Banks do not care about the last two opinions, and are running more than a little scared when it comes to making loans these days. They are equity hungry.
The less equity you have, the more difficult it will be to refinance. Your are probably losing ground as you read this. At lease losing VALUE in your ground.
Strategy: If you NEED to refinance for ANY reason, timing is everything, and the time is NOW. Do not wait for rates to go lower. If property values continue to slide here in California, you could end up without the ability to refinance, without the ability to extract cash that you need, or without the security of a fixed rate mortgage.
Forget timing the rate and start timing the equity. I don’t know about you, but if I’m going to owe more to the bank than my house is worth, I would rather be sitting safely in a 30 year fixed rate with some cash in the bank. This trumps a rate that is .25% lower ANY DAY.
Written by Janet Guilbault, California Mortgage Expert Based Out of the San Francisco Bay Area.
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