Dominion Residential Mortgage - DRM offers a full range of loan programs to help make your homeownership dream a reality.
Coping With Real Estate Market Change
- Categorized in: Investment
- Squirrel away equity. An equity line on your primary residence helps augment mortgage payments should you have to decrease rental income in declining markets. Get the equity line when the market is healthy and lenders can verify your employment and good credit. Don't wait until you lose your job or interest rates skyrocket.
- Don't squirrel away too much. Retain, unencumbered, at least 20 percent to 25 percent of your property equity should you have to sell to get access to cash. Over leverage property in a declining market and you could be holding the bag with an upside down mortgage -- where the balance is larger than the property's value. That could make a needed sale difficult, if not impossible.
- Know your mortgage. Examine the terms of your mortgage. Know the maximum the loan can adjust during each adjustment period and how that will affect your payment.
- Build loan bridges. Refinance with loans designed to get you through the market tightening. Loans tied to stable indexes that don't adjust too frequently are best.Property in high-value markets are better able to handle the risk of interest-only loans that don't pay down the principle or even add to the principle. Such loans keep payments reasonable while rents and values decrease during down times. Again, be careful when using such loans not to over leverage your property.
- Reduce rents slowly. Right now, rents in many regions are rising in your favor in response to the demand of a growing number of consumers who can't afford home prices. Nevertheless, check with your property manager or others in the area to learn historical trends for the past 10 years. Follow the market and follow suit if local rents drop. Be prepared to sustain your properties with a rental rate decrease as large as 10 to 15 percent. Do it slowly so you don't over shoot the need to squeeze. Work hard to please and keep your current tenants so you don't have to lower rates to attract new tenants. Offer improvement
What our customers are saying about us...
"Thanks for making it such an easy experience! You have a great team."
- James S.
"Dominion Residential helped me through one of my toughest times. Everything was easy and on time. All of my questions were answered very clearly. I would recommend them to anyone!"
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