Why Debt Matters And Home Value Doesn’t
Contrary to popular belief, I don't think America's biggest obsession is with cars, Starbucks or American Idol. It's with something a lot closer to home - housing prices.
For the last several years, neighborhoods all over the nation have been in a mass panic over home values. Mine is no exception. When a nearby house goes for sale, everyone grabs a flyer to check out the asking price and compare it to their own properties. I have a friend who checks Zillow.com - the site that "zestimates" your home value - at least once a week. Home values are the topic of discussion everywhere from churches to bars.
As for me, I tune it all out. Why? Because housing prices don't really matter.
Sure, it probably sounds radical, but if you know anything about the stock market, then you'll understand my point. Price is only relevant if you plan to sell today. Like shares in a company, a home's true value is about more than just the current price - it's also about the future. If you plan to stay put for a few more years, chances are that you'll recover much of the value you lost when the most recent real estate bubble burst. If you stay in your house even longer, you'll start to see some gains again.
Even though it can be discouraging to have your home assessed for 30% less than what you're paying for it, know that it still retains value. People will always need a place to live. At the very least, your home is a place for you to live. It's about more than a number on a piece of paper.
Now, if you're worried you'll have to sell - and thus, take a loss - because your mortgage payment is too high, that's another story. Fortunately, it can be a story with a happy ending. There's a guaranteed way to free up more money for your house payment. And it doesn't require begging your bank for a modification or selling your home. All it requires is that you pay down your debts.
If you've got non-mortgage debts like credit card debt, lowering your mortgage won't matter much because you'll still have financial obligations. But by paying down your debts, you'll automatically save money to allocate to loan payments - and gas, groceries or any other necessity. The longer you can stay current on your bills, the longer you can stay in your home - and the better chance you have of watching your value increase.
Worried your debt burden is too large to tackle on your own? No need to fret. Bankruptcy is a surefire way to eliminate debts. As a bonus, filing for Chapter 13 automatically protects your home from foreclosure and other creditor actions.
Want to find out more about bankruptcy? Sign up for a free personal debt analysis with one of our Chicago bankruptcy attorneys - we'll identify a plan that best suits your needs. You might not be able to control the value of your home - but we can help you control your financial future.