I know many homeowners are upside down in their mortgage, meaning you owe more to the bank than your home is worth in today’s market. Don’t panic. Don’t force a sale. Don’t do anything, except keep making your payments – even if it’s hard to do so. Cut back on everything else in your life and keep making payments on your house.
Mark Cuban, one of my favorite thinkers, bloggers and personalities in America, recently wrote this advice on Homes vs Stocks:
So whats the difference between being underwater on a mortgage and underwater on a stock ? Is it that “experts” will tell you to hold the stock in hopes of it going up in value and then explain that those with homes worth less than their mortgages shouldn’t feel bad about breaking their mortgages and defaulting ?
I think “Buy and Hold” for stocks is one of the all time great marketing scams. Ignore it. Always.
“Buy and Hold” for your house is a mantra you should always live by. The difference ?
You can live in your house. You get utility from your hous
e. You may get a deduction for interest paid on your tax bill. You can develop a positive emotional attachment to a house.
A share of stock….well you can…you can look up the pr
ice anytime you want if you think thats fun. There is no utility of a share of stock beyond its financial value. The value of a house is that its your home.
But so many of you are now saying, but I’m upside down or underwater on my mortgage. I owe more than my home is worth. Cuban has this to say to you…
The fact that you may be underwater in your mortgage is of no relevance if you can make the payments.
If you can make the payments on your mortgage, it shouldnt matter if your house is worth 10pct of your mortgage. If you can make the payments, make them.
The value of your home may not go back up for years, but your payments will build equity. It may take years, truly a Buy and Hold Strategy, but you can ride it out and make it work. Time is on your side in a fixed rate mortgage. The longer you stay and pay, the more equity you have later. Cuban has this to leave you with…
Which is exactly the point. Buy and hold works when it comes to the HOME you LIVE IN. Turning in the keys because you have negative equity is a fool’s game. If you do, YOU WILL NEVER OWN A HOUSE.You will be a renter FOREVER.
Your home has far more value than its mark to market price because you can live in it . Do whatever you can to stick it out. It will pay off for you in the long run
Thanks Mark for being a true Maverick, read his full article here!