Myth about fair housing

Gaming

If you are like most people, your home will be the biggest investment you will ever make.

Many people have been led to believe that their home equity is their greatest asset, which may or may not be true depending on a number of circumstances.

Your home equity is the value of your home equity position. You can quantify your home equity by subtracting outstanding mortgages from the market value of your property. The difference is the equity in your home, the equity in your home.

Considering how important your home equity is, what then is the most advantageous way to wisely manage this equity throughout your property?

The best home equity management plan will differ from person to person and will largely depend on an assessment of your individual financial circumstances.

Hopefully, this article will provide you with enough information to help you plan wisely for managing your home equity.

How Safe Is Your Home Equity?

Most people confuse security with stability. Money in the bank, certificates of deposit (CDs), and some savings accounts are stable in terms of never losing your money. But the biggest enemy of all these elements are:

  • Taxes
  • Inflation and
  • Opportunity costs

The biggest threat to your home equity is volatility – the up and down movements – in the housing market. In the late 1980s and early 1990s, many homeowners around the world saw their home equity disappear before their eyes. Thousands of homes were repossessed when people lost their jobs and were unable to make their mortgage payments. As a result, most homeowners lost the value of their property.

Today, an economic downturn may be highly unlikely, but are there other external enemies to your home equity that you have no control over?

Simple factors like neighbors from hell or an incinerator being built on your way or even a few blocks away can immediately affect your home’s equity value.

Another big threat is unexpected redundancy. Running out of cash reserves and finding yourself without a job or source of income will put you in the most difficult position if you can’t keep up with your mortgage payments. Imagine going to any mortgage provider and saying:

“My house is currently valued at £ 350,000 and I only owe £ 225,000, so I have £ 125,000 in home equity. I have always had a job and have kept up with my mortgage payments. I am a professional with qualifications, credentials, and references. It’s only a matter of time before I get another well-paying job. Please lend £ 20,000 of my home equity to keep a roof over my family until I recover. “

What do you think any lender’s response will be?

“I am an income lender, not an equity lender. I have charges for thousands of houses and I don’t want to own your house as well. Show me your ability to pay me right now and I will consider your application favorably.”

Your income is proof of your “repayment ability.”

Your home is very likely to be repossessed if you are unable to pay your mortgage, no matter how small. The number one reason for home repossessions or foreclosures is disability; reason number two is job loss.

Your home equity is not safe.

How Liquid Is Your Home Equity?

How easily can you convert your home equity into cash or separate it from your property? Can you collect it at any time? To convert your home equity into cash or separate it from your property, you must:

  • Sell ​​your house
  • Refinance the original mortgage
  • Get more advances from your current lender
  • Get a new first mortgage from another lender (Re-mortgage)
  • Get a second mortgage or
  • Get an equity line of credit

The first option requires you to give up your home. All of the following three options require a financial subscription. Remember, lenders are income lenders, not equity lenders. They want to know your ability to pay them back the money you want to borrow. The possibility of being approved for a loan or any line of credit is when you don’t need it. Ironically, this is when you look the strongest financially.

So it’s wise advice to make sure you now have a pre-approved home equity line of credit or collect some of your home equity for reserves that you can access right away.

Your home equity is illiquid.

Does Your Home Equity Have a Rate of Return?

Don’t confuse your home equity appreciation with a rate of return on your home equity. Your home may appreciate, but it certainly does not earn you a rate of return or interest.

Strictly speaking, your residential property is not an investment asset for that reason. In fact, it is a liability because it is something you pay for, it does not generate income for you, except when you choose to use the capital that accumulates on it.

When considering the smartest way to manage your home equity, consider the following:

  • Your home equity is not safe
  • Your home equity is illiquid
  • Your home equity does not give you a rate of return

Your home equity is then a dead asset. It’s not safe, it’s not liquid, and most importantly, it doesn’t give you a rate of return. He is a lazy asset.

Depending on your individual financial circumstances, there are compelling and attractive reasons for releasing your home equity for investment purposes. In fact, when you leave it there, you are incurring opportunity costs because your equity is not working for you as its monetary equivalent, and you are not invested in a vehicle that will generate decent investment returns.

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