How much equity will be wiped out in 2018?
November 20, 2017 | Posted by: Mike Garganis
Review your mortgage NOW, the New Year may be too late!
This is usually my downtime and catching up with paperwork, but this has turned out to be the busiest Fall season, and looks like December will be more of the same.
People are scrambling to beat the new rules for two main and important reasons:
To avoid the stress test.
The ripple effect of this will mean house prices will need to be more affordable which in conclusion means house prices will come down.
Numbers don't lie, and I'm sure you've seen tons of Tweets or posts on social media, or even my past newsletter showing what conventional home buyers will be able to afford.
There are 3 transactions to be concerned about:
Refinancing - If you are looking to pull out equity, please remember that the maximum is up to 80% of the appraised value of the home. Based on the numbers above, that equity may be out of reach because of qualifying or because the property value has decreased. Purpose: Debt consolidation, renovation loan, investing, etc.
Purchasing - If you are in the market to buy, my advice would be either get in with an offer prior to January 1, 2018 and you can do a long closing,which can avoid the stress test rules, OR wait 6 months to let the dust settle and see if home prices do in fact drop.
Pulling out equity at renewal time - This is a tough one. People do this to avoid breaking the mortgage and paying a penalty. Its a great time to shop to see who is offering you the better deal while you have an offer from your existing lender. Problem here is the same as the refinance, and most lenders don't publicize that you can renew early as they don't want to lose you.
Talk to a trusted broker who's looking out for your best interests.
I am reaching out to my clients to review their options today. You may not be affected, but if you are, there’s still time to take action. The new rules may or may not affect you. Best to go through a quick 'question and answer' process to make sure.
Your best interest is my only interest. I reply to all questions and I welcome your comments.
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