How To Prepare For a Downturn In The Market

As many of you may know, I host a weekly radio show called “Your Money Matters,” every Tuesday at Noon to 1PM on 560 AM KLZ. On this week’s radio show I spent the first several minutes answering a client’s question about how to protect your home and finances during a downturn in the market. This issue is causing some people to panic. Don’t panic. You still have options, and I can help. 

At my mortgage brokerage company, Affordable Interest Mortgage, I have been involved in the mortgage industry for over 20 years and I know how to help clients plan for and react to this type of market change involving their home and their finances. My passion and energy are always focused on sharing knowledge and educating consumers about the latest news and updates affecting the mortgage industry and thus their finances. That is why I do this weekly radio show, “Your Money Matters.” 

So, having said all that, here’s the full question that was asked followed by my answer, my opinions, and my encouragement for you to take control now, because you have options! 

Here’s the Client’s Question: “We are in tough times right now. Stopping at the gas pump is zero fun. How do we go about protecting our home and our finances right now? And how can we prepare for a downturn?”

Before I answer that specific question, all the panic that is happening out there is not necessary. The general public is seeing and experiencing a lot of negative ads and dramatic negative comments that say things like, “we’re going to have a major financial collapse, the housing market is going to crash, and homes are going to depreciate 30-50%.” I personally don’t believe any of that is going to happen. Again, I’ve been doing this for over two decades and I have been through various types of real estate cycles. 

In my opinion, when people see home values go up as much as we have seen them do and interest rates get as low as we’ve seen, their tendency is to begin to think that it is the “norm.” Well, it’s not the “norm.” That was just something unusual that happened that many people were able to take advantage of, which is great, and you can still take advantage of it and come out ahead! I’ll share more about how in a moment.

I believe the market is going to change back to what it normally is and that means interest rates of 6 or 7%. I’m not in favor of that, I am just stating that it’s the reality. I think those rates are coming. 

So, how do you prepare for that? Well, again, you have options! And there are many ways when you take AIM, Affordable Interest Mortgage. One of the best ways is you can set yourself up right now so to prepare if it gets worse and if rates go up to 8% and you experience debt problems or cash flow problems, I have options available right now for my clients that allows you to access money in a way where you’re not paying for it now.

I am also seeing a lot of people refinancing their home and pulling cash out to pay off debt. Well, I don’t necessarily disagree with that. But what happens after you’ve spent that money and you have other problems or surprises that come up? You still need to have a reserve! As a homeowner you have money available to access but not pay for it until you need it, the equity that you have paid for in your home can give it to you. This is a strategy most people just don’t think about. That’s okay. I can help them think about it and plan for it.

In order to protect yourself from a downturn in the market, you need a reserve. You may be able to access $50,000-$100,000 dollars from the equity of your home because of the home values right now. Imagine, getting access to that money now and it doesn’t cost you anything. All you need to do is get the loan now so you’re able to access the money. If you never need it, great. If you do need it, you can take comfort that you planned for it, and you can access that money and keep your home.

It’s sad and quite painful to even think back and talk about what happened to so many good people in 2008, when 6.7 million people were foreclosed on and lost their homes because they couldn’t access their money and many of them had up to 30% of equity in their home but they couldn’t get to it, they couldn’t access it so they couldn’t keep paying their mortgage and they lost their home.

You can prevent that. Especially now because of home values. I recommend that people gain access to the most amount of equity in their home that they are comfortable with accessing. 

I have clients whose homes have gone up $200,000-$300,000 dollars and they are accessing that money now so it’s just sitting there if they ever need it, and it didn’t cost them a dollar. It’s just there, available to them at a moment’s notice. So, should something come up; a new furnace, other home repairs, experience an illness, car troubles, and they need the money, they can access it. And, they won’t have to sacrifice their 401k, IRA – savings or credit cards by withdrawing from it.

People ask me all the time “When’s the best time to get a loan.” The answer is “When you don’t need the money!” And when you need the money, you might be out of work so now you have to requalify, and you have to spend more money. I’m helping my clients avoid all that and all those hassles and get the loan now while it’s still fairly inexpensive and just have the money available to you if you need it. 

As I wrap this up, I want to also share that I have been in the Customer Satisfaction Business since 1977. In 2001, I founded Affordable Interest Mortgage, a full-service residential mortgage brokerage company in Colorado, Arizona, and Wyoming to offer residential mortgage loan products and investment tools. A mortgage is a big decision and can be used as a powerful financial tool with the right guidance and strategies that are offered at Affordable Interest Mortgage. 

Call me today to explore your mortgage options (720) 895-0500. 

COLORADO NMLS #298191 (720) 895-0500

ARIZONA NMLS #2128571 – MB-1021756 (602) 830-1000

WYOMING NMLS #4594 (877) 594-8475

Equal Opportunity Lender.