Homeowners Watch Your Money

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Remember, your house is not a cash cow--it’s an investment.

[HomeOwners Beware]

Lending institutions are not certified financial advisors or analysts. The loan officers do not call you to advise you to refinance your mortgage because it is the best decision for you to make financially. The loan officers are in the business so that their own mortgages can be paid; to assure their car payments are also met on time, and finally that their children are afforded a good education.

That is why they call you. Period. Please be aware of this. Watch out! Make sure that home equity you possess does not exceed the market value of your home. Remember, borrowing from your equity is not free money--the cash must be paid back with interest. Your house is an investment, not a cash cow. Homeowners who are blind by this principle often have tragic endings.

Not to get off track here, treat your money like any other emotion. It deserves respect! Be cautious when it comes to your money. Always ask yourself when you let your money go - “What am I getting in return?”

You cannot increase expenses without increasing income. This manner of spending illustrates bad judgment in money making decisions. It is not just about your house, it’s also your money we are talking about.

Unfortunately, in the year 2005, I was introduced to a client who purchased a renovated house that was overpriced. Out of desperation for the money, he always rented to tenants who were irresponsible. Consequently, it put him deeper in the hole. Through a friend’s recommendation, I was asked to get him qualified tenants.

Obviously I would not have sold him that house. Although I got him two qualified tenants the damage had already been done. His mortgage was $3,200 per month. He was receiving $2,000 per month for a two one-bedroom apartment, which left an out-of-pocket payment of $1,200. His demise came in the past renting to irresponsible tenants.

His situation became gradually worse – unable to meet his present mortgage payments plus other expenses, his expenses increased to over $4,000 per month. The constant cycle to refinance, to borrow from Peter to pay Paul with an income of $40K annually is always a recipe or formula for disaster. The original mortgage of $300K in 2002 had become a mortgage debt of $500K by year 2005, and the market value of the house only increased to $425K.

Since his mortgage debt was $75K more than the value of the house, he was forced to short sale the home or foreclose and negatively affect his credit. Please don’t have this happen to you. Homeowners, again I reemphasize – be aware when you make that decision to refinance, don’t let your emotions influence you.

Like the desire for a new car, a well deserved vacation or any other foolishness that will lead to disrespect of yourself and your money.

Remember, your house is not a cash cow--it’s an investment.

Thank you! Good health, wealth & prosperity.

Carvel A. Gray is a retired New York State licensed Real Estate Broker

"Speaking Truth to Empower"

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