Are you feeling the budget crunch because of mortgage payments that are too high? If so, you might be looking to get relief by either refinancing a house or selling it. But how do you know which is the best option for your situation?
Here are some questions to ask to help you make this critical decision.
How Do You Feel about the House?
The most important question to ask is how you feel about the house now. People buy houses with many hopes and dreams, but these don’t always turn into realities, especially in these uncertain times.
You might have bought a house thinking it would be the place where you build a family, which then either never materialized or fell apart the way relationships can. Or perhaps you bought a house as an investment possibility, only to later realize that you couldn’t make a profit or it would take too much work to be worth it.
If you’ve decided that you no longer want the house, you should lean heavily toward selling it if that’s at all possible.
What Type of Mortgage Do You Qualify for?
Companies are advertising how low mortgage rates are right now. While that might be true in general, you might not be able to get those low rates.
There are many factors that influence the mortgage you can get, such as your credit score, the loan-to-value (LTV) on the house, and more. If you can get a free consultation, it’s worth it to evaluate these questions, but in other cases, you might be better off investigating on your own.
Once you know what mortgage you qualify for, you can see whether refinancing is actually going to save you money.
Remember, money savings with a refinance is not just about the interest rate: you might be able to save considerable money if you can get rid of private mortgage insurance (PMI), adjust your loan term, or eliminate other unfavorable terms of your current mortgage.
How Is the Current Market?
If you are considering selling your house, you have to understand the current market. This means not just looking at the valuation of the house in question, but also how long it’s taking for houses to sell, and whether your house fits the profile of those that are selling well in the area.
You also want to know whether the market is moving up or down. If the market is moving up, it might be worth it to refinance now and sell later. But be cautious: there are costs related to refinancing, and it will take time to recoup them.
If it’s your primary dwelling you are considering, you also have to look at the market for a replacement home. If you’re not buying a new home, make sure you can find a rental for less than your refinanced mortgage payments. And that it makes sense to forego the equity you’d be accumulating. Except in the worst of circumstances, it doesn’t usually make sense to sell your home and become a renter.
What Is the House’s Potential?
Many great investment houses don’t start as much, but they have great potential. If you put the work into them, they will reward you greatly. For example, you might have a small house on a large property, and by expanding the house, you can sell it for much more. Or maybe the house looks bad but requires only cosmetic updates to increase significantly in value. Or perhaps you have a house in a neighborhood that promises to be the next trendy development area. In these cases, it’s worth it to refinance a house to work on it and/or wait for values to increase in the neighborhood.
On the other hand, if you have a house that is near the peak of its potential, it’s probably best to sell it and get the money now.
Invest Smart and Avoid the Crunch
It’s always a shame when a budget crunch disrupts your plans for a house. You can find yourself facing the hassle of a refinance or needing to sell a house without achieving your goals.
Fortunately, there are strategies for avoiding these problems. At Invest Success, we can help you develop a strategic plan for your investment properties and follow through on them successfully. As a local Colorado company, we understand the special dynamism of the state’s real estate market. We can help you avoid a budget crunch because of your investment property. That way, you won’t have to sell a house before you’re ready and can reap maximum profit from your investment.
To learn more about our investment strategies, please connect with us here.