As real estate markets continue to decline around the country, many homeowners are wondering what they can do to protect themselves and the investment they have made in their home. There are actually many different steps you can take to make sure you stay ahead of the softening real estate market.
One of the first steps that should be taken is to check with either your city or county property tax office to research your current tax assessment. This will tell you what the county or city states your home is actually worth. You should then compare this rate to what your home is currently worth based on current market conditions. It is not uncommon for homeowners in several states, such as in california, to discover that they are paying more money in property taxes than they should be based on the value of their home in the current market.
In some states, homeowners are actually paying up to 40% more than they should be. If you are not sure of your home’s current value in the existing market, it is also a good idea to have your home appraised to determine its current value. Taking both of these steps will give you a realistic idea of the value of your home in the current market and ensure that you are not paying more money in taxes than you should be.
If you do have an adjustable rate mortgage it is certainly worth it to consider refinancing your mortgage to a fixed rate mortgage. Before you actually refinance; however, there are several steps which you should take first. Begin by inspecting your existing mortgage documents to determine whether you will be penalized for paying off the existing loan early. While you will be taking on a new loan, your existing loan will be paid off when you refinance it and this could subject you to penalties is such a clause exists in your mortgage documents.
In some cases, you may discover that you actually owe more on your home than it is worth. This is actually quite common now among homeowners who took out exotic mortgage loans a few years ago when prices were rising rapidly and the market was red hot. Today; however, this can cause quite a bit of dismay among homeowners who are facing large mortgage payments on homes that have dropped rapidly in value. While it is anticipated that the market will begin to stabilize sometime next year, you will need to give some careful thought to whether it would be in your best financial interest to simply walk away from such a situation and try to start fresh.
Additionally, you need to consider how long you plan to remain in the home and balance out that time in comparison to the amount of closing costs you will need to pay when you refinance your home. While a number of mortgage companies advertise ‘no cost’ refinance loans you should be aware that such loans rarely, if ever, exist. The costs for refinancing your loan are typically financed in with the loan under this type of arrangement. This means that instead of paying the costs for the loan up front you will be paying interest on them throughout the duration of the loan. In addition, it is important to research any mortgage company you consider to ensure there have been no complaints filed against them before you refinance your mortgage.
If you plan to remain in your home, it is also a good idea to check your homeowner’s insurance policy to be certain that it is up to date. This can prove to be critical in the event you suffer any type of loss on your home in the future. If you live in an area that is susceptible to hurricane or storm damage it is especially important to make sure that your policy accurately reflects your home in its current state.