That belief made perfect sense at the time: interest rates were historically low, housing values were rising, and for many people owning a house was a perfect plan for forcing oneself to save for the future and retirement. All one had to do was make the monthly mortgage payments.
But is that still the reality?
Now that interest rates have adjusted upward, the increased monthly mortgage payment is creating great instability and stress for many families.
While some industries may be growing, others are having lay-offs. Are you in that situation?
If you think you can pull it out and stay in your house, we have ideas below on how to proceed with gathering the information about how to do it.
For some people, homeownership is no longer financial security; it is an oppressive burden.
Or at least servicing the debt on their current home is a burden.
Some homeowners are either working so incredibly hard to pay the monthlies they don’t have enough money for the extras or even necessities, no free time for relationships or hobbies, and no joy to share. Their house is no longer a place of emotional security and warmth.
Some people just need to make a psychological adjustment and transition into a different house.
Some people spent all the savings they had the past two years.
The truth is, they would be happier paying less moving into a less expensive home or by renting a place and getting their life back. The transition itself, though not usually fun, can be done and over in only a week or two.
(What is your theory about, say, pulling off a band-aid, for example? Do you do it quickly, get past it, behind you, and moving onto bigger and better things?)
It would hopefully be a quick transition period from moving to the less expensive home or rental back into homeownership… but this next time on firmer financial footing!
Many people are fighting so hard to hang onto their houses they are making unwise decisions for the long term: cashing out retirement savings and even using credit cards to pay their monthlies.
Making mortgage payments on credit cards and using retirement funds is not sustainable. It is better to make the hard choice now and save yourself and your family whatever remaining financial resources you have. Don’t give every last dollar to the lender.
Reach out. We’ll help you through it.
I went through it and am on the other side.
When you get to the point where you are either using retirement savings or using credit cards, or are considering doing that, you need to stop and come up with a different plan.
Have you already explored all options for increasing your cash flow? Would you like some assistance?
If so, or, if you can't, at this point the reality is you have three options:
1) list your house for sale and move into peace of mind,
2) keep draining your retirement accounts,
3) let the bank foreclose on your house.
Which choice will advance you and your family quicker?
Property values, though they have historically risen, won’t continue to rise if the demand isn’t there due to rising interest rates.
Our team can do a quick, free comparative market analysis to help you discern if in your neighborhood it is prudent to put your savings into the property, or if it is more prudent and less financially painful in the long run to sell your property now.
Take into consideration what will happen if interest rates continue to rise and property values start to decline.
Will you have any equity in your house if interest rates continue to rise and property values decline?
How quickly, if at all, will property values decline in your neighborhood? Some regions and neighborhoods will weather a recession a lot better than others.
We would like to educate you and help you get ahead of the curve.
We know from experience these cycles only get more challenging if one doesn’t learn from the past or stays in denial about the possible trajectory of the economy and house values.
We've experienced it ourselves!
We can encourage and support you with communicating with your lender.
If the emotionally sensitive analysis indicates it is prudent for you to move into a new situation, and you agree it will give you greater peace of mind to move, our team will make it as easy and smooth as possible.
You will be freed up to look ahead and focus on establishing a stronger foundation on which to build up your financial security.
If you have no equity in your property, the options you have are:
to try to hold onto it without draining your savings, if it makes financial sense in the long run;
or to do a short sale, which we explain below;
or to walk away and let the bank foreclose on it. You want to try every possible option before walking away.
From our first conversation, we help them review what happened, how they got where they are, what options they have, and where they can go to start building on a solid foundation.
Moving is a very emotional decision. In these times it is complicated by the feelings of confusion or failure and the loss of a dream. I know. I went through it a long time ago. It's a psychological adjustment complete with the grieving process, so we want to help you truncate the hard part. Make it healthy and fast!
You have company.
And you may be able to negotiate a way to stay in your property.
It is interesting that no one ever thinks of people from the Great Depression as irresponsible or lazy or deserving of shame.
Maybe you are having a one-person Great Depression, or maybe we're in an economic cycle.
At any rate, they were people like us who made the best decision they could and did the best they could at the time.
So it is with us. This is our time in history and we have to make the best decisions we can under the circumstances.
Our team has the gift of having a bigger picture on it than most people.
It is common for our clients to feel guilty and blame themselves for getting into loans they can no longer afford.
Our take on it is that we all made optimistic decisions at the time based on the information we had.
We were trying to get our families and ourselves ahead.
This past housing boom coincided with an initiative to stimulate and sooth the economy by lowering the interest rates. It was meant as a good intention.
It seemed that interest rates were so low and property values were rising so quickly it would be imprudent not get into the market.
Loan agents were doing the job they were hired to do: selling their company’s products, like the loan you received, and were proud to help you achieve your dreams and the American Dream. Probably the majority of them were doing good work, selling a reasonable product that was in demand.
It is challenging to foresee an undesired consequence.
Well, hindsight is 20/20, as they say.
This is our time. Hopefully it won’t become a Great Depression scenario.
All we can do is to maintain our dignity, make hard choices, and get on with building a great life.
Speaking of maintaining one’s dignity, it is no-one’s business but your own that you are getting out of a property you can no longer afford.
If asked, or you feel compelled to explain your decision to move, you can say, “Interest rates may continue to rise, and we decided it is prudent for us to get out at the top of this cycle”, or, “We thought it would be a more prudent financial decision to sell, wait for the market to adjust, then get back into the market at an opportune time”, and leave it at that.
You can frame it like you are an economist-educated insider protecting your family’s interests.
If you are ready to be pro-active, give us a call. We will be happy to answer your questions on the phone, via an online meeting, or in person.
We hope this has been useful to you in some way.
Again, please feel free to reach out to us.
We can help you wherever you live.
My team of friends and I have Discrete Referral Network colleagues we trust everywhere in the North America.
If you want to know how to talk to your lender, please look for our free mini-report below.
