As the article points out it is this segment of "trade up" buyers that help to fuel the real estate market by selling their smaller starter house for a bigger more expensive house.
A few highlights from the piece
- Unlike underwater borrowers — who have negative equity, with more debt on their homes than those homes are worth — equity-poor borrowers have less than 20% equity in their homes. Why 20%? In the current tight lending climate, buyers generally need to put 20% down on a home in order to get a mortgage. So if you’re currently in a $400,000 home, even if you have 20% equity, you can’t trade up to buying a $600,000 home solely on the basis of the money you would extract if you sold.
- So what should you do if you’re equity poor? First, be happy you’re not underwater. Next, probably the most prudent course is to do what the majority of Americans are doing: not much of anything. Sit tight, try to be patient — and take advantage of today’s low mortgage rates with a refinancing, if you possibly can.
Getty Images |
No comments:
Post a Comment