Is History Repeating Itself?? 🤨
The graph in this video tells us there is a huge number of local homeowners are asset rich and cash poor, and in an environment of increasing costs of living, rising interest rates all eating into our disposable incomes, many of us will be wanting to look for viable options.
So what are they? Short term options are limited to 2 that would give you the gift of time to work toward the best longer term solution. Both involve a call to your lender to discuss whether...
1. Is it possible to switch your loan to interest only for a period of time enabling you to keep up with your payments and potentially add a buffer or...
2. Can you extend the time of your loan - so if you currently have a 20 or 25 year mortgage, would extending this term out to 30 years reduce your payments in the short term while you sort out longer term solutions.
Longer term solutions bring me to what we call the 3 R’s
- Refinance
- Release equity
- Relocate
Determining which “R” best fits your situation will depend on how long you’ve owned your home (if you’ve been in your home longer than 5 years you will have a ton of equity that will give you great options, whereas if you have been for a shorter time there will be more variables that need to be considered. How quickly you act is going to be paramount to your outcome.
As more people assess their situation and make decisions we will no doubt see an increase in the number of homes that come to market and as we all know, stock levels are at historic lows meaning your potential of a higher sales price is sooner rather than later and will provide better outcomes and options moving forward.
The reason I’m saying sooner rather than later is, if we look at 2013, where the gap between the median house price and the mortgage balances at that time ended up sitting almost neutral - so not a lot of options there for pulling out profit or equity. Now if we look at where we are in 2023 so far, you can see there is still a healthier gap between the median house sale price & the average mortgage balances - much like in 2003, but if the cycle repeats - that current gap is likely to shrink as the buyer/seller ratio levels out.
We are heading towards a potential snowball effect with house prices softening as more houses hit the market and buyers having access to less money each time the rates rise.
If you have questions about where you sit in the graph and what equity you have to work with now is the time to reach out.