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Home Equity Loans and Refinancing Put California Homeowners Back in Control
by Joe Taylor Jr.
CMR Columnist
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Creative loans have allowed many people, especially in high-priced real estate markets like California, to buy houses that they otherwise couldn't afford. Lenders have pushed everything from adjustable-rate mortgages to home equity loans, trying to keep business going even as interest rates have slowly increased and housing prices have remained high.
California residents who've used creative mortgages to buy more house than they should have are paying the price. As their interest rates climb, some homeowners find that they can no longer make the payments. Others have used the home equity theyve built through a few years of loan payments to successfully refinance. Still, a growing number of California residents are forced to endure foreclosure, losing their homes and ruining their credit in the process.
Interest Rates Refocus Californians on Reality
When interest rates dropped and housing prices soared, home buyers were drawn to the real estate frenzy and the abundance of seemingly affordable loans. Housing rates are cooling now, and mortgage rates are rising. Therefore, some financial experts suggest that consumers think carefully before following in the footsteps of their homebuying predecessors of the early 2000s.
Here are two risky loans you may want to avoid:
- Interest-only mortgages: When your adjustable interest rate increases and you begin paying on the principle, your once-affordable payments could skyrocket.
- Option ARMs: Early payments on these mortgages dont even cover the interest, meaning your balance could increase to more than your original loan.
Now that the home buying euphoria is fading and real estate markets are leveling off, financial experts recommend using home equity loans or fixed-rate mortgage refinancing to reset financial balance, before its too late.
Sources
About the Author
Joe Taylor Jr. coaches musicians, entrepreneurs, and other adults that want to shift their careers. He holds a Bachelor of Science in Communications from Ithaca College.
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