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Dave: Hey friends of Black Diamond Mortgage, Dave Boye and Maria Phelps here. I just saw a headline on MSNBC (just google 5.8 trillion dollars cash in people’s homes and it’ll come up), but they’re bringing up a point that I thought would be good for all of us to make, but especially those of us in the mortgage industry. Apparently there is 5.8 trillion dollars in equity in people’s homes. What was going on back in 2008?

Maria: People were upside down in their mortgages and had no equity.

Dave: They’ve now statistically figured out that people have equity in their homes. So I came up with THREE BIG PRINCIPLES. PRINCIPLE ONE: If you have a lot of equity in your home, don’t touch it! Leave it there. That is your nest egg. If my financial advisor friends are watching, I’m here to tell your clients to keep the equity in their house.

Dave: PRINCIPLE TWO: Life happens.

Maria: Whose car breaks down and you need to buy another one? Or you have a medical bill? Or travel expenses for family emergencies? All of these things happens on a regular basis.

Dave: Or you’ve had 5 children since you bought your house with all the equity and it’s too small and you have to do something. So when you have to do something, one of the ways is take a look at the equity in your house and see if that can fix the problem.

Maria: A lot of times we see people who have high installment payments like a car or credit card. That can be hard to pay, especially when you aren’t paying down principle. So we’ve seen a lot of people be able to save thousands on their monthly debt payments just by putting that on their equity. It may increase their mortgage payment by $100, but then they just saved $1200 on their revolving and installment debt.

Dave: If you’re in a situation where you have too much debt and your bills are getting too high, you can maybe fix it by using the equity in your house and getting things under control.

Maria: One thing we’ve seen is people will do this on a vehicle rather than a house. This takes a long time to pay off and a vehicle doesn’t hold value like a house, so we don’t recommend that.

Dave: Another thing you’ll find is realtors telling you to cash out on that equity and go buy that home you really need. Maybe you could put money into the house you live in, or you could cash out on it and go buy something else without the hassle of remodeling and construction.

Dave: PRINCIPLE THREE: Reverse mortgage. You have all the equity in your house, but you have no cash, and you like living in your house. The reverse mortgage allows you to extract the cash out of your home, keep living there, and not make payments on your home. If you’re on a fixed income, this may be a good option. It may not. Talk to us, your financial advisor, and your family. They have an elaborate counseling program to make sure you don’t get yourself in a bad situation by taking one of these.

Dave: In the economy people’s wealth is now stored in their home, and we just wanted to make you aware of it. 5.8 trillion dollars is a lot of money! The average person might have $100k sitting in their house, and hopefully it’s in their “house” savings account. But if things have gotten crazy and you need to touch it, that’s what a mortgage is for. So if that’s what you need, we’d like to help.

Maria: There is no cost to just come talk to us. We are a free service and you can ask questions. We want you to be knowledgeable in what you’re doing and we don’t want you to make bad decisions. We want you to be sure about what you’re doing.

Dave: We can even come down here to the river to talk so we don’t have to be in the stuffy office. Have a good week!

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