When equity is available, households paying mortgages find it difficult to access wealth … more
The biggest point of selling home ownership is that it builds wealth while rental is lost money. But as I pointed out last month, mathematics for mortgages often simply do not work in this way. The conventional 30 -year mortgage is ahead of interest with interest and the estimate does not exceed this interest, it takes 15 years to truly sell a home for enough money to truly produce a cash return. A recent Wall Street Journal article It points out other challenges faced by homeowners trying to access shares in their homes, higher borrowing costs and lenders’ risk resistance, higher ownership taxes and capital profits, and concerns about housing volatility.
According to the article, “household equality has risen nearly 80% since early 2020 – from $ 19.5 trillion – thanks to an overtime increase in housing prices. And Ice mortgage technology He found that the average home owner paying a mortgage has about $ 313,000.
It is important to remember what “Equity” represents in a home. In general, equality is the difference between how much a home can be sold on the market and the amount it has to pay for the loan. A home worth $ 500,000, for example, with a $ 200,000 loan balance has $ 300,000. To gain access to this wealth, a household would have to sell the house or could borrow against that money, which usually a credit at home.
When it comes to taxes, equality does not really help, since real estate taxes like any other costs associated with maintaining a home must be paid in cash from household income. A household in history had a 50% increase in real estate tax after buying the house, costing them $ 1,750 a month. And taxes, as opposed to other maintenance costs, such as replacing a roof or landscaping, cannot be postponed and ownership taxes almost never fall.
Borrowing against equality, a line of credit or Heloc, is just like any other type of borrowing. A lender must assess the risk and then charge interest. The interest rates are high now. Thus, to make a solution on the roof using existing shareholders, refinancing with current interest rates and higher monthly recovery costs. Stock shares essentially lengthens the total repayment. This $ 500,000 home in an early example, if the household had a HELOC, could have a balance in the sale of $ 450,000 which means that the sale for sale would only be $ 50,000. And according to the story of the Wall Street Journal, many backs deny these loans are worried that families are overly extensive.
What about selling the house? The problem with this strategy is the obvious question, “where do these people live now?” If they need a comparable home, they could be found to pay another mortgage with higher interest rates now. The execution of existing shares through a sale simply may not be possible, and if it is, a household usually has to borrow again to find space to live or rent. And if the interest rates are high enough, buyers may not be easy to find and the sale price can be reduced enough to shave any shareholders.
A line in history incorporates the problem with the American dream of wealth through home property: “[Americans] They have raised $ 35 trillion wealth in their homes, but many feel less good because of it. ”
For most households that make the day and day from life to American, labor and payment of accounts, the idea of pulling shares from a home may never appear. If salaries are in line with expenses and there are no major changes in life or significant financial problems, the household may be found 30 years after the first mortgage payment sitting in a heap of wealth. However, events such as a pandemic or wild market fluctuations due to invoices that affect jobs and interest rates can complicate even the most consistent household.
So far we should learn our lesson, especially after the 2008 crash: we need an alternative to the traditional 30 -year mortgage. The cooperative and fractional property supported by the government is an answer I have proposed. There is always a risk of lending, but the equality acquired should not be difficult or impossible to exploit.
