Ocean Mortgage 2022 Newsletter 205

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Recession Prep:
Will You Have Liquidity?

Goldman Sachs says there is a 38% chance the U.S. will enter a recession over the next 24 months (echoed by Deutsche Bank, among others). That’s high enough for me to know it’s coming.

If you own your home, you have likely accumulated more equity than ever – and you feel good about it. But be careful, the Federal Reserve says there will be 5-6 more rate hikes this year to tame the highest level of inflation in 40+ years.

A dangerous combination of recession, inflation, higher rates, Ukraine-Russia conflict, ongoing COVID ramifications, etc., means that sooner or later some people will begin to sell their homes out of need or opportunity (especially at today’s height of the market). When that happens (and it has started already), more housing inventory becomes available, and the value of your home will likely reduce – thereby eroding your equity.

WHAT YOU CAN DO NOW (whether you currently need liquidity or not):

  • Don’t pay-off your existing 1st mortgage – since your rate is better than what you can get today

  • Get a 2nd mortgage Home Equity Line of Credit (HELOC) – to capitalize on the high value of your home (enabling you to tap into your equity in the future without having to sell your home)

HELOC Benefits

  • Borrow up to 95% of the value of your home

  • No requirement to draw any of the credit line

  • Borrow, pay-down or repay, and re-borrow at anytime

  • Interest Only Payments for 10 years • Prime+0.70% with no annual fee

Here’s the Point: Before the upcoming recession kicks in, get a HELOC so that you have back-up  liquidity (especially now when your home value is high and you can comfortably qualify).

Mike Kanuka, Founder & President

NMLS #901949 (Company)
NMLS #880882 (Individual)

Equal Housing Opportunity