, (PressExposure) July 08, 2008 -- As David Newby, ex-loan officer and author of Why Didnât Anyone Teach Me This sees it, âItâs saddening how under informed people are about the financial risks they are taking by following traditional advice when it comes to protecting their #1 asset- their homes.â
âTraditional thinking limits us in many ways. For example, most of us are taught to pay our house off. Itâs good advice as far as paying less interest, but at what risk? Home equity is a large chunk of most Americansâ total wealth, and for most people itâs needlessly at risk of being lost due to a natural disaster or reduced income due to injury or job loss.â says Newby.
It is a given that you canât control the weather or if you might be out of work for awhile, but you can control how liquid your home equity is. Have access to it while everything is fineâ¦ refinance it to 100% LTV or have a Home Equity Line of Credit (HELOC) open on it. Just make sure you get one that is convertible to a fixed rate second mortgage if you have to use more than 50% of it.
If a natural disaster swings through your area, deposit your entire HELOC in your bank account as part of your preparation plans. That way the bank is risking not getting paid by the insurance company instead of you, and youâll have extra cash on hand to pay your bills as you recover. A HELOC can come in very handy if youâre out of work temporarily as well.
âI tell the story in my book of a gentleman who called me to refinance his home when I was a loan officer. He had been laid off and had depleted his savings. Unfortunately I couldnât help him because he had a recent late payment on his mortgage, and he ended up losing all $100,000 of equity he had in his home because he didnât have access to it BEFORE he needed itâ Newby recounts. âEvery American that can should avoid this potential danger with a little preparation.â
When the storms of life come, either through financial emergency or natural disaster, having access to your home equity will put you in a much better position to weather the storm.
Newby -- author of âWhy Didnât Anyone Teach Me This?â -- is a very outspoken financial strategist who helps Americans avoid 4 key million dollar mistakes and retire in comfort by more effectively and safely positioning their existing wealth. You can download a FREE sample of his book at http://www.FinancialPlanning202.com.