Well, here is some lousy news for you: Interest rates are increasing and the stock market may continue its decline.
For much of the last two months, the stock market has been particularly volatile while dropping over 10% from its year highs. Interest rates have been increasing and are expected to continue to rise through 2019.
Higher interest rates have deterred home buyers resulting in decreasing property values which are chipping away at the net worth of homeowners. Combined with stagnant salaries and slumping values of retirement and other investment accounts, many families are feeling less affluent.
So what does all of this mean to you?
#1 If you already own, this is a very good time to considering making substantial improvements to your home. Even though interest rates are increasing, they still remain historically low. Further, interest on home equity lines of credit (or “HELOC”) are generally tax deductible if used for home improvements.
#2 For current homeowners, there are two types of refinancing that you may want to consider. First, depending on the interest rate of your current mortgage, you can evaluate refinancing to a shorter term mortgage (e.g. going from a 30 year mortgage to a 15 or 10 year mortgage). Typically, the shorter the term, the lower the rate so you may yet still save while you pay off your mortgage faster. Second, if you have a primary mortgage or HELOC that is either partially or non-deductible, you should consider your refinancing options.
#3 As the financial markets continue to decline, this is an optimal time to maximize contributions to your qualified retirement plans such as 401k’s and IRA accounts. In taxable investment accounts, if you have already locked in some capital gains, look to harvest tax-favored losses where you can by selling off less desirable investment positions.
#4 And, as always, be sure to maintain an ample cash reserve for when the financial markets ultimately settle.
If prices continue to drop, buying opportunities may abound. Once you are certain that you have all of your required expenses covered, keep a close eye on investment bargains.