I am 5 years into a 30 year mortgage and my house has appreciated by a good bit. I could refinance and extract a nice chunk of change, although I would be looking at a higher interest rate (and then there is the question of what to do with the cash).

Although somewhat risky, it would seem that if property values plunge, or I decide I need to abandon the city for a more rural spot, I don't loose everything when and if I can't sell my home.

What do you think?

-- puzzled (1@2.3), April 03, 1999

Answers

Yes yes yes - max it out.

Let's all hope for stability - but ITSHTF you will have something to live on, your little nest egg will not have come close to the usurious interest you have been repaying during the last five years.

-- Andy (2000EOD@prodigy.net), April 03, 1999.

puzzled,

Prudence suggests considering various possibilities. Many, including myself, expect such adverse economic effects of possible Y2K problems as to bring about a decline in real estate prices in many areas. But, we could be mistaken. If at all possible, try to conceive a course of action that protects you from various possible scenanrios.

To a considerable extent, REDUCING debt is prudent when facing economic disruptions.

If you feel that increasing debt may be better, think through how you would deal with different degrees of Y2K, and other, possible problems.

Take care.

Jerry

-- Jerry B (skeptic76@erols.com), April 03, 1999.

Y2k has been likened to a risk that we carry insurance to cover us in case of loss. Ask yourself - what and how much am I willing to pay for the premium to insure my possable loss. The answer is complicated because it is hard to evaluate just exactly how certain and how severe the risk of y2k is. Each person has their own methods of determining the potential risk and then act accordingly in their preperations. Good Luck. TJ

-- TJ (trickjames@hotmail.com), April 03, 1999.

It would seem that debt is not something good to get deeper into now. However,one possibility, if you are uncomfortable with your current city locale, is to refinance/get a home equity loan, whatever, and take that cash and put it someplace safe and sound. then if stuff starts looking worse, get a small piece of land elsewhere with a RV or something to live in. If not much happens though, just put the cash back into your mortage. Either way, you're covering yourself.

-- anita (hillsidefarm@drbs.com), April 03, 1999.

The key is what would you do with the cash? It would be a shame to have the money in a checking account or savings account and then if the bank would fail due to bank runs massive Y2k problems or a depression you are left with a big loan and no way to repay it. It may be better to reduce debt, apply all surplus cash to the loan etc. so if there are major problems you at least do not have to worry about losing your house. For example if you have a $200,000 home and only $20,000 equity, if prices drop 30% you are under water and owe more on the house than it is worth. What if the bank wants more money to cover the loss? If you use the money to buy food or barter items, it may make sense.

-- Tom (aa@wow.wow), April 03, 1999.

I experienced the Alaska depression of the mid-eighties. My house suddenly was worth half of it's original value. Fortunately I owned it and had it rented out. Income before, income after.

Many people were left holding mortages of $200,000 on a house worth $100,000 and had no job. They wound up walking away from their equity and letting the bank have the house. If (or when, depending on your Y2k view)Y2k results in a Yourdon-type depression, banks (before failing, while failing, after failing) will want the predepression mortage payment. If you do not have a job any longer, and your house is worth 50% (or less) of it's mortgage, you loose. Some people think that because so many people won't be able to pay that the banks will not try to collect. From my experience in Anchorage, they will want to be paid predepression values even more.

The question then is; how much equity are you willing to walk away from if your house value deflates to 50% or less of your mortgage? Or, are you willing to pay predepression mortgage payments on a house worth 50% of the mortgage?

-- leslie (wellnow@gee.whiz), April 03, 1999.