In 2002, I bought a condo for $85,000. In 2005 the values went up significantly to where the condos were selling for $180k to $200k, so I decided to refi to remove the ARM loan, pay off credit card left over from my divorce and most importantly, get the Loan To Value (LTV) to 80/20 so I did not pay the Mortgage Insurance (MI). Sounds like a very reasonable and fiscally responsible thing to, right? Mind you, I was not a Realtor then and I was dealing with chemo due to breast cancer diagnosis…. The Lender I called said “HEY, why not do a 125% loan”. I said “What? That does not sound right or like a good thing to do”. If I recall, the lender did the blanket statement that the real estate prices will always be rising or blah blah blah. He said something like “just cash out on the place” NOW, I thought for a minute…. shit will I even be alive in 2 years, 5 years… will it really matter. Guess what I did????
I stood by my conviction to do the right thing and my mission. One to obviously survive cancer but to be fiscally responsible and pay off the credit cards and get the loan at 80/20 LTV. AND you know what, I thanked God every day that I did! in 2009 or 2010, these condos were not selling for any more than $45k completely remodeled. I was in a great spot since my mortgage payment was still significantly lower than renting and my principal was only $95K or maybe $100k versus $250k potentially. I was able to ride out the short sale and foreclosures and maintain my home since I made a wise decision in 2005!
Reason I am mentioning this …….home prices have fully recovered, interest rates are low and it can be enticing to pull out your equity for that luxury items or that vacation….. think long and hard about it!! While the equity of your home can be a very powerful asset, use it wisely and not as an ATM. Talk to your financial planners…. in some cases this maybe a great idea.
If you do not have financial planner and/or a great mortgage professional, let me know I can suggest some to you. As always, I am here to help answer question within my scope.
Schulte Realty, LLC