Humor is the best medicine to stress. So, here it goes.
But seriously, in the face of declining home values, what is an average consumer to do with protecting and building home equity?
Is making additional monthly payments towards the principal the right thing to do?
If you are like most Americans who have been taught to pay down your mortgage as fast as you can, then you would probably answer "Yes" to the question above. However, time has changed and we are living in a different world now (compared to 50 years ago) and the laws and economic environment are based on a new set of rules.
While our goal remains the same in that we want to be "debt free", how we go about achieving it can be quite different. The concept of "building equity" by paying more each month towards the principal is flawed. The cash that you put in was your asset or "equity" to begin with, so the simple act of shifting your cash asset to your home is not really "building equity". You build equity through appreciation. In the case of investment properties, you also build equity by having your tenants paying down your mortgage.
Now, there are ways to save on mortgage interest payments via new innovative mortgage programs. The concept is to leverage your existing non-interest bearing checking & savings accounts to offset your mortgage balance, effectively reducing the interest incurred by your mortgage. As with most other things, this program is not for everyone. It has its pros & cons. For a free consultation to see whether this is something for you, feel free to send me an email or give me a call at 650-625-0203.
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