Coronavirus: The Silver Lining For Property Owners
These are uncertain times on a number of levels. In the wake of the coronavirus pandemic, world markets are in disarray. Global economies are in freefall. As more and more countries instigate lockdown procedures to contain this potentially deadly virus, the effects on the economy are sure to be devastating. Many readers will have already felt the economic effects as they go into self-isolation. They may be self-employed or freelance workers whose income has dried up as their clients go into self-isolation. They may have been placed on furlough at reduced pay. Or they may be among the unfortunate whose employers have let them go unceremoniously to protect their profits.
Unfortunately, the economic effects of the coronavirus are likely to have serious and far-reaching consequences for all of us. Even if we’re lucky enough to avoid coming into contact with the virus itself. Still, while the pandemic may be a source of panic for many, there is a single glimmer of silver lining in this stormcloud for those who own real estate. Here we’ll look at some of the good news for property owners in this perilous and uncertain time.
Urgent: Even if you’re hurting for capital right now, resist the urge to panic-sell
Your home, or your investment property, is your biggest source of capital, and in a period of global panic, you may be tempted to panic-sell your property. Still, we strongly advise against this. Selling now will see you make a suboptimal profit at best or go into negative equity at worst. Of course, the urge to panic is understandable, especially if you’re without means of income. But if you need to sell assets we’s advise selling things from around the home like precious metals, wines or other commodities before selling your property. The same even goes for your stocks.
Mortgage payment holidays can make financial planning much easier
If you’re worried about making ends meet for your next mortgage payment on your home or investment property, it may be worth talking to your bank about potential mortgage payment holidays. These can buy you some time to get your house in order financially and either seek new earning opportunities or liquify other assets around your home or in your portfolio.
If you have a rental property, your tenants may be struggling to make rent this month. Your property management company will advise you if this is the case. You can pass the savings from a payment holiday onto your tenants and reduce the risk of them jumping ship when all this is over. After all, great tenants are hard to find. You want to keep them for as long as you can.
All-time low interest rates could see you save a fortune
Interest rates for mortgages are currently at historic lows. At the time of writing, interest rates for 15 year mortgages are at around the high 2% rate while 30 year mortgages are around the low 3% rate. This has prompted a huge spike in refinancing applications. If you like the idea of saving money in this time of global crisis you should certainly look into refinancing. It’s important to be proactive and take advantage of these savings now. Changing to a lower interest product with a locked-in rate could see you save a small fortune in interest. Let’s face it, the more equity you can get on your property the better, and you may well find yourself reaping the rewards of staying with your property through this tumultuous time.
While refinancing can be a disruptive experience and come with upfront costs (expect feed between $1,500 and $5,000) it could mean that more money goes into owning your property and less money goes to the bank.
And you know what that means…
You could pay off your mortgage much faster
No matter how old you are and how many working years you have left in the tank, paying off your home loan faster is good news for the future. Yes, you may find yourself with slightly higher mortgage payments. Yes, this might put a squeeze on your cash flow and see you dig into your savings / overdraft for a little while. But today’s sacrifices could pay off in a big way tomorrow, freeing you from mortgage debt faster and potentially even giving you the opportunity to retire earlier.
So, while there may be a stormy cloud over the horizon for some time, the silver lining could benefit you for years to come.