When the pandemic started, the real estate market boomed after the authorities reduced interest rates to spur the economy. But two years after the health crisis began, home sales started to decline.
For those thinking about selling their homes, now may not be the best time. Data from the National Association of Realtors showed a steady decline for the past four months. May 2022 was nine per cent lower compared to the same period last year.
But what happens if you find yourself in a financial emergency and need to access some of that equity? Here are several tips for leveraging your real estate investments to help get you through a tough time:
Refinance your mortgage
If you’re in a position where you need to access some of the equity in your home, refinancing your mortgage can be a good option with much less risk if you have an unencumbered mortgage. By refinancing, you can get a lower interest rate or longer term, helping you save money. Refinancing your mortgage gives you access to cash if you need it.
When you refinance your mortgage, you replace your current mortgage with a new one. In this situation, your lender uses the new mortgage to pay off the old one, leaving you with just one loan and one monthly payment.
If you’re considering refinancing, now may be a good time to do it. Interest rates are still relatively low, and there are many options available to choose from.
Take out a home equity loan or line of credit
You can also take out a home equity loan or line of credit to access the equity in your home. With a home equity loan, you borrow a lump sum of money and make fixed monthly payments over a set period. You can use a home equity loan for debt consolidation, home improvement projects, or other expenses.
A home equity line of credit works or a HELOC functions more like a credit card. You are approved for a certain amount of credit and can borrow against that limit as needed. The interest rate is variable, and you only pay interest on the amount of credit you use. HELOCs can be a good option if you need access to cash but don’t have a specific use.
If you’re considering taking out a home equity loan or line of credit, make sure you use the money wisely. Avoid using it for frivolous expenses, such as a new car or vacation. Only borrow what you need and make sure you can afford the monthly payments.
Sell your home
Of course, you can always sell your home if you need the money right away. This may not be the best option in the long run, but it can give you the cash you need to get through a tough time.
Selling your home is a big decision, so make sure you weigh all your options before you do it. If you’re unsure whether selling is the right choice, consider talking to a financial advisor. They can help you understand your options and make the best decision for your situation.
Selling your house is also an excellent way to pay off mortgage arrears. But you should move fast to avoid repossession if you are in this situation. If the home gets repossessed, the lender may not get the price you expect for the house.
Get a reverse mortgage
If you are over 62, you may be eligible for a reverse mortgage. This allows you to tap into the equity in your home without making monthly payments. The loan is repaid when you move, sell your home, or pass away. You will not have to worry about any difference in the home value, and loan amount since lenders are not allowed to loan you more than the value of your home.
A reverse mortgage can be a good option if you’re looking for a way to access the equity in your home without having to make monthly payments. However, you should remember that your heirs will not be able to inherit your home if you have a reverse mortgage. You must remember that a reverse mortgage may not be suitable for everyone. Make sure you understand how a reverse mortgage works before you decide to get one.
Rent out your home
You can always rent your home if you don’t want to sell it. This can provide a steady income to help you through a tough time.
Of course, renting out your home comes with its own set of challenges. You will be responsible for finding tenants, maintaining the property, and collecting rent. You should also make sure you are comfortable with the idea of strangers living in your home.
If you decide to rent out your home, you can do a few things to make the process easier. You should ensure you understand the laws in your state regarding landlords and tenants. You should also consider hiring a property management company to take care of the day-to-day tasks of being a landlord.
No matter what option you choose, be sure to do your research and talk to a financial advisor before making any decisions. With careful planning and execution, you can use your home equity to weather any financial emergency.