One of the things we are reminded when the real estate market surprises us with a serious slowdown is that it is very good to have a reasonable amount of equity in a home, especially if we're never certain when we may want or need to sell it.



Say, for example, you own a modest $500,000 vacation home that you rent out frequently. You bought it originally for $400,000, and you've been sprucing it up during the times it's stood empty−upgrading the appliances, adding new wall and window coverings, and finding ways to make it more and more beautiful. And you've financed these upgrades largely through a second loan you took out against the home.



The problem here is that your decorating and upgrading could put you in a position where you have as much money in the home as it is worth. Should the market take a dive−and the value of the property decline−you may not be able to get all of your money out of the home in a sale. Indeed, you may have to pay out of your pocket to cover the full amount of indebtedness secured by the home.



It is wise, therefore, to maintain a healthy cushion of equity−wiser than it is to decorate the property to the nines−just in case the market turns and your options suddenly narrow as a result. The same is true with your own home, in fact, and with many capital assets you may own. For assistance with real estate call Beth at 425-450-5208.