There is nothing more stressful than not being able to pay your mortgage every month and put your home and equity on the line. When you fail to make your mortgage payments, it gives the bank the incentive to take back the home from you due to the fact that you are not paying down on the loan. Even worse, they can take all of the previous equity you had in the property too. This is why until your house is fully paid off, the bank still owns it. In this article, I am going to show you how to dodge an underwater mortgage while showing you the importance of property maintenance.
1. Buy during a buyers market
During a buyers market, there are many homes for sale. In other words, there are lower prices on the market. The smartest thing to do would be to save your money and buy at the bottom of the market. However, you cannot always time the market but you can know when you are getting a good deal. This is what we did back in 2012 and our property has almost doubled in value. All in all, buyers markets drive prices down which allows you to afford homes. This is great for you because it lessens your chance of getting stuck underwater on your mortgage.
2. Maintenance
One of the most common ways a person winds up with an underwater mortgage is by allowing their property to slip into disrepair. This process happens gradually and occurs to all property, but failure to tend to the wear and tear can cause catastrophic damage to a house, dragging down its value in the process. Even if it means taking out advance loans to fix a plumbing problem or pay for foundation repair, the short-term price is worth the long-term assurance your property will not diminish in value.
3. Remodel
As far as marketing your house is concerned, curb appeal definitely counts. Make sure that your walls are painted nicely, the carpet is clean, the house is tidy, and everything is put in place especially during a showing. Things like remodeling your kitchen, updating your bathroom, getting a new roof, etc can dramatically increase the price of your home.
All in all, being a smart home buyer is very important these days. You are dealing with a huge financial decision that you must make. Unless something catastrophic happens to your home, it should gain value over time especially if you bought it in a buyers market. This is off of previous real estate history.
However, the return averages only 1% a year after inflation which really isn’t that good. I would personally recommend buying a home that needs some rehabbing done. In other words, it needs to be fixed up. Once you have it fixed up, you can stay in it for a given amount of time and then sell it when you want to. As far as going underwater on a mortgage is concerned, you would have to buy at the peak of the market or not pay your mortgage.