Experts Offer Nevada Mortgage Advice to Weather Housing Slump
Three years ago, the northern Nevada housing market experienced a boom that carried through until about six months ago, when it stabilized and left some homeowners in a difficult financial situation.
Sonny Lopez, a local loan officer, tells the Reno Gazette-Journal that he noticed an increase in the amount of foreclosures in the Reno/Sparks area in 2005. He believes the increase in foreclosures in this area is due to “the cost of living going up and the retirement not matching it.” he said, noting that the greatest group affected includes those in their 50s and 60s.
At this point, an investor comes in and offers the struggling homeowner money to move and pays off their Nevada mortgage, which is the remaining amount owed in the original purchase price of the house.
These investors end up buying the property for a lower rate than the market value and turn around and sell it for more. Although Churchill County does not experience this high number of foreclosures, Lopez advises struggling owners to refinance before falling into debt.
In essence, mortgage refinancing involves paying off an existing home loan to obtain a better interest rate or to spread out the duration of the mortgage loan, resulting in lower monthly payments.
Refinancing also allows borrowers to tap their home equity, or money they have paid on the principal of their home, to pay off other debts, such as credit cards. There are fees involved, and this is why loan officer Jane Capurro advises seeking out a reputable and licensed mortgage broker.
“If you’re having problems, you don’t want to get yourself backed into a corner,” said Capurro. “What you want to do is to work with a mortgage broker who you can be open and honest with,” she said.
Capurro advises against interest-only mortgage loans, as does June Young, president and director of Young & Associates Mortgage Services. She describes interest-only loans as a big, dangerous bet.
This process is a gamble because if the property value did not appreciate over that period of time, the homeowner cannot refinance and may be stuck paying more than they can afford. When searching for a fixed-rate loan in today’s market, Capurro identifies good fixed interest rates as falling between 6.0125-6.25 percent.
For some owners who need financial assistance, the best option may be home equity loans, which are like a second mortgage. These allow the owner to borrow against the amount they have paid toward the principal on their home loan combined with its appreciated value, providing the borrower access to these funds while placing their home as collateral.