When people are struggling with credit card debt, lines of credit and other unsecured debt, they have a few options available to help them. One popular choice is to refinance your home (if you own it with enough equity) which means to increase your mortgage and use that extra money to pay off your credit cards and unsecured debt. That way the unsecured debt you had will now be part of your mortgage, a secured debt. The benefit to doing this is saving money on interest, thus making it more affordable to repay. Mortgages these days have very low interest rates, thanks in part to being a less risky loan for the banks because they are secured by the home. If you cannot make your payments, the bank simply repossesses your home to recover its money. In contrast, credit cards can have much higher interest rates and make repayment of the debt very difficult.
August 20, 2013
Margaret H. Johnson
Reports are circulating once again that a crash landing of some type is still written in the stars for real estate values. What is meant by crash landing is that property values will drop 25% perhaps by 2015. This prediction came on Tuesday, July 30, 2013 from Capital Economics.
The great debate continues. A soft landing for Canada’s housing market gets the consensus amongst other analysts.
Either case sends fear up and down the economic food chain, especially for those of us trapped in middle and lower incomes, where our one and only substantial asset is our homes. What would happen if we lost 25% of the equity in our homes?
How are we supposed to react to this kind of news?