Trade-Up While The Market Is Down

If you were thinking about buying a larger home for your family, but decided to wait until the market improves, you're wasting money. Mathematically, the best time to move up is when prices are down.

Let's say the value of real estate has declined by 10% for your current residence as well as the homes you would like to buy. Assume your current home that was worth $500,000 last year, can now only bring in $450,000 and that the home you want to buy was selling for $800,000 last year, but today can be picked up for $720,000. Last year the cost to upgrade from your home to the new home would have been $300,000. Now the difference is only $270,000 which is a 10% savings of $30,000!

In addition to the decreased cost difference in today's market, there are other advantages to moving up at this time. In the 2005 seller's market, homes were often selling in just hours at prices well above the asking price. There were limited homes to choose from and no reason for sellers to make any concessions. It was simply a take it or leave it market, but not anymore.

In today's buyer's market, with the larger supply of available houses, the odds of finding a home more suited to your needs are much higher. In addition, with the saturation of housing, sellers are now required to stage their homes for the market. They are spending money repairing and upgrading their homes so they have greater appeal to the limited number of buyers in today's market. This has further improved your chances of finding a better home that is clean, well-maintained and ready for occupancy without the need for you to pay additional expenses.

Moreover, you may be able to capitalize on the slowing market by finding a highly motivated seller. You may even be able to draft a contract that requires concessions from the seller that enhance your purchase. What about having the seller pay all of your closing costs, repaint, or re-carpet the entire house hurt to ask for what you want.

So, if you are planning to upgrade, find an aggressive real estate agent and price your home fairly based on todays market value. Make the move now while the price difference is minimized and there are still great buys to find in this short-term market decline.

Mortgages, Markets, and Money

Experience has taught me that mortgages are intimidating financial instruments for many people, that markets can and do change requiring a rethinking of mortgage planning, and that saving money is always a good thing. I have been a mortgage professional advising borrowers who need residential mortgage financing for over twenty years.

In your current situation, you probably have an excellent rate on an adjustable rate loan and are aware that rates have been on an upward swing. It's likely you are waiting for the expiration of the fixed period of your loan or possibly the end of a pre-payment penalty phase before restructuring your mortgage obligation.

I am in that situation with my current mortgage. I have a 3.875% interest rate on a 5/1, (5 year fixed then annual changes), interest-only loan on my home that is set to begin adjusting in mid 2008. I know that based on the current market, if I let the loan automatically adjust, my rate will automatically adjust to about 7.5%, nearly doubling my interest cost. I will lose money if I sit tight and do nothing. So, refinancing my mortgage is going to be the best solution for me based on today's interest rates and the market and this ensures that I save money.

I know that if I refinance now, I will lose out on the remainder of the tremendous rate advantage I have compared to the market today. So, I am waiting, closely watching the market, trying to determine when the most opportune time will be for me to refinance my mortgage so that I can save money and invest it elsewhere.

There are several other factors that I need to consider to maximize my strategy in addition to the rate change:

-----Because my interest-only period will also expire at the time of my mortgage reset, amortization will begin, increasing my payment.
-----I also am looking at other financial obligations I have and trying to determine if while restructuring the mortgage, I pay these debts off as well to reduce after tax interest cost and improve cash flow.
-----Housing depreciation has me somewhat concerned. My home has appreciated nicely in the four years since I secured this debt. However, if my home value declines, my borrowing power will be diminished.

There is no absolute answer today to what lies ahead. What I will be doing for my family and me is creating a plan that will:

-----Assure that I have the liquidity and credit reserves to make the payments into the distant future to weather any unforeseen situation that may arise.
-----Utilize my equity to maximize my financial growth, diversity and wealth.
-----Optimize the tax advantages provided by Uncle Sam.

This may not be the time for you to make such a move with your current adjustable rate mortgage, as it is not the perfect timing for me. However, it may be time for you to establish a plan to prepare for the upcoming changes.

Please visit my website www.AmericasMortgageStore.com and check out the current market rates, read informative articles, and learn more about mortgage financing and your current situation. I welcome your call so we can begin reviewing your situation now to formulate a timeframe best for your particular situation.