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Ft.Lauderdale Market Conditions- Is Paying off Debt Better Today?

By
Real Estate Agent with EWM Real Estate

With the dawn of a new decade, there is hope that Americans have learned from the greed of the first decade and have begun to protect themselves for the changing times ahead.

I think we're all on the same page that the days of quick profits, flimsy financed projects are now a thing of the past to the average consumer. While corporations have teams of committees combing through legal loop holes, the average guy on "main street" is now thoroughly convinced that tried and true methods of earnings are going to accomplish financial freedom. Slow and steady will win over the "big score".

I was recently asked whether it was better to take savings out of the bank and pay off the loan on a couple's primary home. This couple bought a bigger home in the worst stretch of the real estate market and took a loan that was 33% of the home's value while trying to sell their then primary home that was paid for. The old home finally sold and the proceeds were put into the bank to earn a whopping 2%. The mortgage on their present was cast at a fixed rate of 6.25%. My question back to the couple was, "Can you find an very safe and secure investment that would yield you at least 6.25% in today's market?" There answer came quickly, "No". I retorted that they had their answer.

Today's main street is looking to pay off debt. With the average adult American now in the clutches of a credit card debt exceeding $15,000, most people are leveraged to within a paycheck of bankruptcy. Those that do have money feel trapped. They have little confidence in the stock market which has shown a great deal of volatility within the past decade. They have just as many questions about real estate. Many are concerned with putting money into their homes to pay off a loan on a home that might decline further in value. While I can't answer for the concerns of people who invest in Wall street, I can comment on those who are seeking to own their home.

Where are you going to find and investment that also doubles as a roof over your head? As long as you don't sell your home, your "loss" is only on paper. Let's also agree that phantom profits should not be gauged on a time when it wasn't right to sell your home. Many "cry" about what they should have done and when they should have done it. I say, it wasn't the right time to sell or you would have done so. When you sell, you should campare your sales price to what you originally paid for your home. To many, this would show a profit, however slim it might be in several cases. The mortgage default crisis which was the last straw that broke the financial system in 2008 affected less than 10% holding property.

Most people in America continue to pay their mortgage every month and most people who live in a home continue to hold a job. It is to this overwhelming majority of people that I am talking to at the moment. While my heart goes out to an ever increasing number of people who have lost their job, home, family or a combination thereof, most people in this country are still solvent. Their minds are cluttered by the news media spreading their own brand of sensational terrorism. My advice to those who can pay down debt, do so now! With old mortgages commanding interest rates that are too high compared with current rates, if you have the money, pay it off. There is no better place to put your money than the place you rest your head at night. For those who have other savings, pay off the credit cards which are now at ridiculously high rates and compound each day. For those who pay minimum payments, you'll see clear of the dress or shirt you bought today, in about 20 years.

Let's look to the new decade with more hope and less debt! Is it necessary to buy the biggest home in the neighborhood anymore? Can the boys share a room instead of getting separate rooms? Can the home office go into the family room? Buying down seems to be wise in a period of time where conditions in the market remain tentative. I still think people should buy or sell their homes when the time dictates to do so, however, I am advocating a smarter and more thoughtful decision making process moving forward.

If you'd like to talk further, look me up. Happy New Year!