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Item Upon - Home Equity Myth
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What do you reckon any lender’s response will be?
“I am an income lender, not an equity lender. I have charges over thousands of houses and do not want to own your house in addition. Show me your ability to repay me right now a
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Many people have been led to believe that their home equity is their largest asset, which may or may not be true, depending on a number of circumstances.
Your home equity is the value of your ownership position in your home. You can quantify your home equity by subtracting any outstanding mortgages from the market value of your property. The difference is the value of your stake in your home, your home equity.
Bearing in mind how significant your home equity is, what then is the most advantageous way to wisely manage this equity during your entire ownership?
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 enough information to help you plan wisely with regards to managing your home equity.
How Safe Is Your Home Equity?
Most people confuse safety with stability. Money in the bank, certificates of deposits (CDs) and some savings accounts are stable in terms of you never losing your money. But the biggest enemy of all these items are:
- Taxes
- Inflation and
- Opportunity Costs
The biggest threat to your home equity is the volatility (the upward and downward movements) of the property market. In the late 80s and early 90s, many homeowners worldwide watched their home equity disappear right before their eyes. Thousands of homes were repossessed when people lost their jobs and could not make their mortgage payments. As a result, most homeowners lost their home equities.
An economic recession may currently be highly unlikely, but are there other external enemies to your home equity over which you may not have any control?
Simple factors such as neighbours from hell or an incinerator being built down your road or even a few blocks away can immediately affect the value of your home equity.
Another big threat is an unexpected redundancy. If you run out of your cash reserves and find yourself with no employment or source of income, this will put you in the trickiest of positions if you cannot keep up with your mortgage payments. Fancy going to any mortgage provider and telling them,
“My home is currently valued at ?350,000 and I only owe ?225,000 on it, so I have ?125,000 of home equity. I have always held a job and kept up with my mortgage payments. I am a professional with qualifications, credentials, and references. It is only a matter of time before I get another well-paid job. Please lend me ?20,000 of my home equity to keep a roof over my family until I get back on my feet.”
What do you reckon any lender’s response will be?
“I am an income lender, not an equity lender. I have charges over thousands of houses and do not want to own your house in addition. Show me your ability to repay me right now an
Investment performance does not just happen; there must be a process in place to get superior results. There are nearly 15,000 mutual funds available for you to invest in. How do you decide which one is right for you? Once you select the ones that are right for you, how do your measure your success? Money mangers are people and they must be monitored and measured; they must be held responsible for their results. You do not need to pay very much for average fund performance (just invest in indexes).Above average fund performance does not happen by accident. To get above average fund performance, you must measure and monitor. If you are not going to do that, hire someone to do it for you or stick with indexes.Once you select a
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 enough information to help you plan wisely with regards to managing your home equity.
How Safe Is Your Home Equity?
Most people confuse safety with stability. Money in the bank, certificates of deposits (CDs) and some savings accounts are stable in terms of you never losing your money. But the biggest enemy of all these items are:
- Taxes
- Inflation and
- Opportunity Costs
The biggest threat to your home equity is the volatility (the upward and downward movements) of the property market. In the late 80s and early 90s, many homeowners worldwide watched their home equity disappear right before their eyes. Thousands of homes were repossessed when people lost their jobs and could not make their mortgage payments. As a result, most homeowners lost their home equities.
An economic recession may currently be highly unlikely, but are there other external enemies to your home equity over which you may not have any control?
Simple factors such as neighbours from hell or an incinerator being built down your road or even a few blocks away can immediately affect the value of your home equity.
Another big threat is an unexpected redundancy. If you run out of your cash reserves and find yourself with no employment or source of income, this will put you in the trickiest of positions if you cannot keep up with your mortgage payments. Fancy going to any mortgage provider and telling them,
“My home is currently valued at ?350,000 and I only owe ?225,000 on it, so I have ?125,000 of home equity. I have always held a job and kept up with my mortgage payments. I am a professional with qualifications, credentials, and references. It is only a matter of time before I get another well-paid job. Please lend me ?20,000 of my home equity to keep a roof over my family until I get back on my feet.”
What do you reckon any lender’s response will be?
“I am an income lender, not an equity lender. I have charges over thousands of houses and do not want to own your house in addition. Show me your ability to repay me right now a
Why is it that, in a team setting, some participants seem to hold more influence than others even though they may not be team leader?Where does this influence or power come from?What impact do these people have on the team? If the effect is being detrimental to the team's well-being or holding back progress, then why have them on the team?Let's take, for example a continuous improvement team, a task force, perhaps a project team developing a new product.It is healthy and, sometimes, maybe even necessary to include team members who are invited because they are in a position of authority or have a great deal of expertise in / experience of the team's key objectives.WHY?Credibi
- Taxes
- Inflation and
- Opportunity Costs
The biggest threat to your home equity is the volatility (the upward and downward movements) of the property market. In the late 80s and early 90s, many homeowners worldwide watched their home equity disappear right before their eyes. Thousands of homes were repossessed when people lost their jobs and could not make their mortgage payments. As a result, most homeowners lost their home equities.
An economic recession may currently be highly unlikely, but are there other external enemies to your home equity over which you may not have any control?
Simple factors such as neighbours from hell or an incinerator being built down your road or even a few blocks away can immediately affect the value of your home equity.
Another big threat is an unexpected redundancy. If you run out of your cash reserves and find yourself with no employment or source of income, this will put you in the trickiest of positions if you cannot keep up with your mortgage payments. Fancy going to any mortgage provider and telling them,
“My home is currently valued at ?350,000 and I only owe ?225,000 on it, so I have ?125,000 of home equity. I have always held a job and kept up with my mortgage payments. I am a professional with qualifications, credentials, and references. It is only a matter of time before I get another well-paid job. Please lend me ?20,000 of my home equity to keep a roof over my family until I get back on my feet.”
What do you reckon any lender’s response will be?
“I am an income lender, not an equity lender. I have charges over thousands of houses and do not want to own your house in addition. Show me your ability to repay me right now a
People are up to their eyeballs in debt. With interest rates rising, many people are experiencing severe difficulties keeping up with their credit card and home loan obligations. The problem has been fueled, in large part, by the extremely low adjustable rate mortgages which many people took advantage of during the past few years to purchase homes that they could really only afford at those rate levels. Unfortunately, those rates have now increased, which means that the monthly payment obligations have increased substantially.The result of these events has been devestating for many, and you should not feel isolated or alone if this is your situation. The problem is rampant, and many people are in the same boat looking for w
Simple factors such as neighbours from hell or an incinerator being built down your road or even a few blocks away can immediately affect the value of your home equity.
Another big threat is an unexpected redundancy. If you run out of your cash reserves and find yourself with no employment or source of income, this will put you in the trickiest of positions if you cannot keep up with your mortgage payments. Fancy going to any mortgage provider and telling them,
“My home is currently valued at ?350,000 and I only owe ?225,000 on it, so I have ?125,000 of home equity. I have always held a job and kept up with my mortgage payments. I am a professional with qualifications, credentials, and references. It is only a matter of time before I get another well-paid job. Please lend me ?20,000 of my home equity to keep a roof over my family until I get back on my feet.”
What do you reckon any lender’s response will be?
“I am an income lender, not an equity lender. I have charges over thousands of houses and do not want to own your house in addition. Show me your ability to repay me right now a
Have you ever wondered why the rich get richer? Some say that it is because they can leverage on greater wealth in each successive generation. However for many, the real reason it that the rich teach their children financial skills that stay with them for life. These skills are then used with greater skill in each successive generation leading to a snowballing increase in wealth.This article therefore highlights three wealth concepts that you may consider imparting to your children at an early age so as to give them a financial head start in life.#Concept 1: Good debt and Bad DebtMany people are drowning in debt today and on the flip side, some people stay away from debt as far as they can. A more balanced appr
What do you reckon any lender’s response will be?
“I am an income lender, not an equity lender. I have charges over thousands of houses and do not want to own your house in addition. Show me your ability to repay me right now and I will favourably consider your application?”
Your income is your evidence of your ‘ability to repay’.
Your home will very likely be repossessed if you do not have the ability to repay your mortgage, however small. The number one reason for home repossessions or foreclosures is disability; the number two reason is loss of employment.
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 cash it in at any time? To convert your home equity into cash or separate it from your property you have to either:
- Sell your home
- Refinance the original mortgage
- Take out further advances from your existing lender
- Obtain a new first mortgage from another lender (Re-mortgage)
- Obtain a second mortgage or
- Obtain an equity line of credit
The first option requires you giving up your home. The next three options all require financial underwriting. Remember, lenders are income lenders, not equity lenders. They want to know what ability you have to pay them back the money you want to borrow. The chance of you being approved for a loan or any line of credit is when you do not need one. Ironically, this is when you look the strongest financially.
So it is wise counsel to ensure now that you have a pre-approved equity line of credit, or to cash in part of your home equity for reserves that you can immediately access.
Your home equity is not liquid.
Does Your Home Equity earn a Rate of Return?
Do not confuse the capital appreciation of your home with a rate of return on your home equity. Your home might appreciate in value but it certainly does not earn you a rate of return nor does it earn you interest.
Strictly speaking, your residential property is not an investment asset for that reason. It is in fact a liability because it is something that you pay for, it does not earn you an income, except when you chose to utilise the equity that accrues on it.
When considering the wisest way to manage your home equity, bear the following in mind:
- Your home equity is not Safe
- Your home equity is illiquid
- Your home equity does not earn you a rate of return
Your home equity then is a dead asset. It is
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