Time to Cash Out? When Should You Take Advantage of High Home Value?

Should you seek out a new Floria home loan? As you weigh the current value of your house and try to evaluate when would be an ideal time to sell, consider these questions:

1. Are you happy where you are?
The problem with trying to time the Florida real estate market and sell before a bubble bursts is you’re trying to predict the future. You’re gambling your present home and happiness for a lot of unknowns. Will a price dip actually happen? Will it be steep and sudden or a gradual softening? Short-term or sustained?

While you always have the option of selling because prices might be going down, not many people do, says Dick Peach, vice president of the Federal Reserve Bank of New York.

“As a rule, most people don’t buy a house as a short-term proposition,” says Peach. Because this is more than an investment, it’s a lifestyle choice, “people don’t take buying and selling lightly,” he says. “Because of that, it’s pretty impractical to try and time the peaks and troughs in home prices.”

He believes that sticking with your Florida home loan and hoping for the best, even when values dip, is the right thing to do.

2. Are you already planning a move?
One of the times it might make sense to try to get out before prices go down is if you’re already planning a move.

“The secret to cashing out equity is to move from a high-cost market to a low-cost market,” says Nicolas Retsinas, director of the Joint Center for Housing Studies at Harvard University. But only if you were planning it anyway, independent of equity issues.

Include the transaction costs when you run the numbers.

“Selling and buying back can gobble a large percentage,” which means they have to be expecting a major market correction, says Eric Tyson, author of “Mind Over Money: Your Path to Wealth and Happiness. Selling “really makes more sense for people who have other reasons to think about selling, like relocating or downsizing.”

3. Do you have a manageable mortgage?
Can you afford your mortgage payments? If you’re barely making it now and might have trouble if rates went up, you might simply want to refinance to a fixed rate. You may also want to rethink your mortgage if you’ve got an interest-only or reverse-amortization Florida home loan.

If you were already planning to sell and move to a smaller home or a less expensive area in the next few years, and you really want or need that equity, then getting out before values drop could be a smart move.

4. How much equity do you have?
If you bought when Florida housing market prices were the highest, leveraged every cent to get into the house, have only been there a short time, and prices are headed south, then you’re vulnerable. If you have to sell, you may not get what you owe.

Any time you have less than 10 percent to 15 percent equity in your home, “you’re a little at risk,” says Ilyce Glink, author of “50 Simple Steps You Can Take to Sell Your Home Faster and For More Money in Any Market.”

Even if you’re a new homeowner, you don’t have to panic.

“There’s not a lot you can do,” says Guttentag. “You can’t prevent the decline in your equity. So as long as you have the capacity to keep making [Florida home loan] payments, you’re OK.”

There is also the issue of whether or not you live in the house in question. You may wish to sell at your home’s highest value if this is solely an investment used for flipping. But don’t act quickly and get out of a Florida home loan if it’s your primary place of residence.