Wild Swings in the DOW
Recent Uncertainty in the Mortgage Market
In light of tightening of credit the home mortgage industry there is evidence that perhaps loans that were made in the past are no longer going to be accessible to those who do not qualify. In the last several years in response to a good economy and increased competition, loans were extended for which the underwriting requirements were not as strict or severe as they had been in the past. As a result there has beeen a recent shakedown of the good credits from the bad and a day of reckoning/correction in the marketplace.
Interest only loans have been very popular as of late offering the allure of a lower payment as no principal payments are required. But as with all marketing teasers there is always a catch and for mortgage loans there is no exception. If you have substantive other capital available to pay off a loan if need be then a interest loan might be a prudent and wise decision. However, many utilized this option for the purchase of homes which were really beyond their financial means. Remember “Creative Financing Means You Probably Cannot Afford It.” Wise and careful money managment dictates that you should always live below and not up to your standard of living that your income affords you. In this way you will best be able to handle the inevitable financial road bumps which will happen along the way.
It is wise that one acquires an equity line on their home as an additional insurance policy to handle any financial emergencies as well as making these monies potentially deductible. Mortgage interest continues to be the largest itemizations that one can take when preparing their taxes and equity interest, as long as you meet certain exceptions, will help lower your overall tax bill.
The shakeout in the market/DOW will more than likely continue for an extended period but those in the market should not react but rather respond to the volatilites. Though some/mabye even all of your investments both pre and after tax may have fallen, you should still evaluate your dollars invested in light of other alternative opportunities. Human response being what it is will typically steer us to sell at the lowest possible price out of our fear while reality/intellectually a depressed stock cycle might be providing the highest opportunity for future bargains and increased returns. Though a volatile market necessitates an increased state of awareness and examination of your investment portfolio, it might not necessarily be a time to make any sell decisions. Working with both your CPA and financial advisor through these times will help guide and direct you towards making wise decisions.
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