Over the past few decades the interest rates for a home loan mortgage refinance have gone from high to low. Early in the eighties the average interest rate for a home mortgage was roughly eighteen percent, but these days we are now seeing the interest rates for the same exact loans around five or four percent. This is largely due to how our economy has been progressing throughout the years and how banks are trying to make large loans viable to consumers.

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Power Tools of Savvy Homeowners (by David Newby) For centuries, the prevailing wisdom regarding your home mortgage has been to “pay it off as soon as possible.� With 9 out of 10 Americans retiring broke in the richest country on Earth, it may be time to rethink that strategy. Here are 3 Reasons you should consider mortgaging your house to the hilt if you want to have a comfortable retirement. Reason #1- Safety. Home equity isn’t always safe. Hurricane Katrina taught us this lesson very vividly with thousands of homeowners being paid less than their homes were worth by their insurance companies. You may trust your insurance company to pay you what your home is worth in case something happens to it, but why take the chance? At your current saving rate, how many years would it take you to replace $30,000 or $50,000 of lost equity? Another experience that can “steal� your home equity is a real estate slump. If your equity is taken out of your property, you can use it even in a down market. Plus you can use your equity to earn you more money. More on that in Reason #3. Reason #2- Access. Your home equity is your money. You should always have access to it, even when you don’t need it. Everyone runs into a financial emergency from time to time, and if you wait until you need to get access to your home equity (in case of job loss or other emergency) you can’t get it! In the Katrina example above, if a natural disaster hit your house you could use the liquid equity to simply move to another house. This is a much more appealing alternative than waiting 3-6 months or up to a year to get YOUR OWN MONEY paid to you by your homeowners’ insurance policy. Have access to your home equity even if you don’t need it at the moment. *don’t get a Home Equity Line of Credit unless it’s one that can be converted to a second mortgage at your discretion. It looks like a credit card on your personal credit report, and when you use more than half of the available money your credit score will drop quickly. Reason #3- Return on Investment. Let me ask you a question: if I offered you an investment that earns 0%/yr. interest, that you have to contribute to every month, and that you have to ask permission to get out of, would you invest in that investment? If you answered no, then you basically just said you don’t believe in paying your house off. That precisely describes home equity- it earns 0% and you have to ask the bank for permission to use it if you’re paying your house off. Whether a home appreciates or not has to do with the real estate market it is in; it has nothing to do with whether you’re paying it off or not. As such, you should refinance your house to 100% if possible with an interest only loan and invest your equity prudently at an attractive rate of return. Where to invest your equity? There are several options, and it depends on how willing you are to exercise your “risk muscle.� I have clients who routinely earn anywhere from 9% up to 18% or more on their home equity. This simply “repositioning� of home equity can put an extra $1 million in your pocket over your lifetime, and give you greater safety and access to your own money along the way. Don’t be overwhelmed by this concept. If you’re paying your house off or it’s paid off now, seriously consider mortgaging your house to the hilt with an interest only loan tomorrow. *********************************************************** Learn outside-the-box strategies that the wealthy use and that your CPA and financial planner likely don’t even know in David Newby’s book “Why Didn’t Anyone Teach Me This?� at http://www.FinancialPlanning202.com ***********************************************************

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Many families are beginning to feel the impact of a slowdown in the economy. The impact is even greater on families with home mortgage loans.
It is believed that just over half of parents with home mortgage loans will have to restrict spending on their children in 2009 as living costs increase. Nearly one in two families are struggling to make ends meet and almost a third of those who are living comfortably now expect to cut backs on spending next year.

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Of course you wouldn’t want to lose your home and so a 40 year refinance for your existing mortgage loan may be a very attractive and appealing alternative to keep your house and make sure your family are safe and secure. Though you may dislike the idea of having to owe other people money for such a long time, you may find that your low salary rate isn’t enough to make you qualify for short term loans. But then again, that isn’t just the single factor to like a 40 year loan scheme.

Good time to buy, bad time to sell. The housing index from the National Bank has been released for February. What it shows is a dramatic decrease in housing prices in Vancouver.

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If hunting around and doing research to find an affordable mortgage with all the features that suit your particular needs is something that you would be too busy, uninterested or otherwise unable to do, then perhaps an experienced mortgage broker is a good option to consider. A diligent mortgage broker will be up to speed on the most recent options available on the market, and more importantly he or she will know which mortgages are great deals and which ones should be avoided at all cost.

Since I first published this article on short sales, they have become even more widespread and many of my clients have been seeking loans to purchase a “short sale.” Many people are still not sure how they work, so I thought it a good idea to reprise the article this week.

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