Real Estate Decisions When Money is Tight
The only constant in life is change. Changes in life can be sudden. Too often, homeowners find themselves in a position where they can no longer afford their home. If you’ve been in this position, you know how many hard decisions there are to make. You’ve felt the flood of emotions. You’ve asked yourself the questions. You’ve wrestled mentally and emotionally with yourself and your choices. Do you borrow against the house, sell, or try to hold on longer even with a shrinking income?
How To Handle Your Triangle Real Estate Investment When Things Get Hard
The trick here is not to let yourself be paralyzed by hard decisions and the hope that things will get better if you just hold on. In your head, you know that you need to reduce your expenses, but in your heart, you don’t want to give up your home. Where will you live? How are you going to make ends meet? What should you do?
You’re a logical person. You’ve already counted your dollars, and you know when the well is going to run dry. It’s time to take action and explore your options. Linda Craft & Team, REALTORS can offer years of experience from helping others in situations just like yours.
The Three Most Common Financial Hardships
The stress caused by a financial change is hard to deal with. You may go through stages of shock, disappointment, depression, anger, and sometimes regret. Sadly, many people living in a financial crisis also lose their marriage or their health because of the stress. This blog was written with the hope that people will find help and solutions from the real experiences we have had in working with thousands of homeowners in these situations.
The good news is, financial hardship is usually temporary (depending on what age it hits you and what caused it in the first place). As a top Triangle real estate company, for over 30 years we have walked alongside many families in tough financial times. In our consultation, it is hard to tell families in such deep despair that things will get better, but soon, they find themselves back on their financial feet and excited about shopping for a home and rebuilding their life. Luckily, they have a new perspective from the lessons they learned.
Here are the three most common financial hardships that families face. These hardships have a way of destroying marriages, rocking families in a really bad way, and can lead to a loss of homes.
1. Medical Expenses
Failing health and medical expenses can hit you like a double-edged sword. When medical expenses and failing health hit homeowners at the same time, working again or at the same level may not be possible. This type of financial hardship may not be temporary. Health problems and medical bills may call for a drastic life change.
It doesn’t seem fair that in caring for a loved one, medical expenses can become so high that you have to sell your family home to put the money towards medical bills. If you are young when this situation hits, it may be temporary. Soon, this time and debt will pass and you will be back in a home again. If you are older, realistically you may not have enough working years left to get out of debt. Selling your house to buy something less expensive may be your best solution.
If you are considering declaring bankruptcy, beware of the serious consequences and bankruptcy mills advertised on late night TV. Call us for a referral to an attorney that will guide you with your future in mind.
2. Job Loss
You got a new job, moved into a new home, a life was good. Until one day, you walked into work and were handed a pink slip. When your regular paycheck stops, it doesn’t take long for most people to switch into crisis mode. They typically blow through their savings quickly, and then turn to borrowing money to make ends meet. They borrow from…
- Family members
- Retirement accounts (with high penalties for early withdrawal)
- Credit cards (with insane interest rates)
- And if they qualify, they borrow on their house (using an equity line of credit)
Keep in mind that the cash flow created from borrowing is temporary. It can become a ball and chain around you for your future. Don’t dig yourself into a deep dark hole with this plan. It could lead to bankruptcy, short sale, or foreclosure. Even worse, the stress of long-term debt can lead to a life of regret, divorce, and even more heartache.
3. Consumer Debt (aka, Life Happens)
The car breaks down and you have no savings, so you put the repair on a credit card with 20% interest added to your repayment. Then your children need braces, and you are given a monthly payment plan from the orthodontist. You wreck your car, and now you have to buy a new one. A car payment of lease payment is added to your expense column. College costs continue to increase and slowly, with time, life circumstances cause unplanned consumer debt to grow and grow and grow.
You pay and pay, month after month, but the balance you owe never seems to shrink. Homeowners in this situation have a huge advantage over renters. They own something of value, and can sell it to get under the stress that follows high consumer debt.
Be careful of debt consolidation plans – they will ruin your credit. The total of your monthly payments may have gone down and feel better on your budget and lifestyle, but it is a major red flag on your credit report. Your credit score will drop immediately, and for years, everything will cost you more. The interest on your credit cards will increase, health insurance and car insurance may also go up.
Selling a house to free up equity to pay off debt is one of the best ways to pay off high interest rate consumer debt. Your house can be an ATM machine. Owning a home is an investment that grows in value. Unlike renting, when you own a house you can sell it at any time and move the equity you have gained anywhere you wish. If consumer debt is causing you stress, consider selling the house and starting over.
Consumer debt has high interest rates with no tax advantage and is a big ding to your credit score. A mortgage comes with a low interest rate that is tax deductible and is considered good debt on your credit report.
When consumer debt is stealing your joy and making your life miserable, my advice is to sell the house, get out of debt and then read Dave Ramsey’s Total Money Make Over so you never find yourself in this awful situation again.
Don’t Make These Mistakes When Selling Your Raleigh Area Home!
Don’t dig yourself deeper into the hole that financial hardships create. Climb your way out by avoiding these common mistakes homeowners make during financial hardships. Find out how to make good home buying decisions in the greater Raleigh real estate market.
How Can We Help You Through Difficult Times?
If you need home buying or selling advice, please call Linda Craft & Team, REALTORS for a free consultation. One of the great advantages of talking with a top producing Realtor like us, over an average income earning Realtor, is a top agent makes enough money that they do not need to sell you anything. We are here to help and will be around for years to help you again when the right time comes for you to move.
We have helped people find solutions, make excellent real estate buying and selling decisions, and guided our clients to wealth building for more than 30 years. If you find yourself in need of great real estate advice, that is tried and true over 7,000 times, contact us today.