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While ultra-low interest rates and a return to some extent of financial liquidity are benefiting some in the US, there are many others who had hoped to take advantage of refi opportunities who cannot. Families falling into the margins may have good or even excellent credit; but, unfortunately, credit is not the issue.
For many, the challenge is that homes they’ve purchased in recent years have dropped in value. This is true of homes all across North America, and the drop in value left many home owners owing more on their mortgage than the home is now worth.
But even for those whose home may still be worth more than the mortage on it, the margin between purchase price and home value may be such that a refi will not create any beneficial reduction in monthly payments. For some families, this could spell the difference between staying in a home or having to sell for whatever they can get.
There is foreclosure, of course. But families with good credit are more likely to try and sell first rather than foreclose and do long-term damage to their credit ratings.
For those findings themselves in a tight situation, there are some options. Perhaps the best strategy for now is to approach your current lender and request a loan modification. With government pressure on, it may be possible to modify one’s home loan to make it a bit more affordable.
That said, the other option is to begin the process of selling your home. While not ideal, some families are in the process of downgrading to more affordable housing, even renting properties or opting for “rent-to-own” properties.
In this sense, there are some unique opportunities. New homes on the market are suddenly more affordable than existing homes. Builders often have far more flexibility than home owners, who cannot afford to cut the price of their home below a certain level. Builders, on the other hand, will do what is necessary to move inventory.
In addition, a glut of condominium-style homes and luxury condominiums exists at this time. Such developments were in the works long before the market slumped and while construction has slowed, they are still scheduled for completion. The time may be ripe for a radical downgrade that offers a huge economic benefit in terms of a brand new, high-quality living space at a much-reduced monthly cost.
It might be beneficial to inquire with builders regarding pricing status, or even to tender an initial offer and see how the builder responds. A $450 thousand luxury condo in a sought-after area, for example might well reduce by $50 thousand or more given the current economic climate. This kind of investment may well be the solution of choice for young couples and families seeking mortgage relief short of an all-out foreclosure of their property.
Will the market recover? Eventually it will. But a full recovery make take a decade or more. For now, however, there remain both solutions and opportunities for those who find themselves stuck in the margins of this modern mortgage crisis.
Last 3 posts by phillenbrand
- Loan Modification Fix - July 20th, 2009
- Free Home Loan Modification Help For Homeowners - July 10th, 2009
- Would One Mortgage Regulator Work? - May 21st, 2009
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