With skyrocketing housing prices, economic instability, and global unrest, the idea of a collapsing dollar isn’t too far off. Most preppers are already prepared for a serious financial crisis with material provisions like food, water supplies, and more, but many folks are lacking when it comes to financial IQ, specifically what happens to your assets.
Most important of all, your home! What would happen to your house if the dollar were to collapse?
If the dollar collapses you can expect the value of your house to go way down. If you owe money, you will still owe it to your lender. Your monthly payments may go up depending on the specifics of the terms.
Will your house lose most of its value? Are you going to get foreclosed on? Is there any way to keep the bank at bay during a financial disaster?
These are all questions that everyone should ask themselves when considering the possibility of the dollar collapsing.
In this article, we’ll answer those questions and more, and hopefully provide insight into what you can do to hang on to your house if the dollar collapses. Read on to learn more.
If You Own Your Home, the Value is Likely Going to Plummet
First things first, it is critical to understand what will happen to most housing markets when the dollar is on death’s door.
The housing market will undoubtedly take a severe hit, but in addition to that the value of all homes will likely plummet as well.
If you are planning on selling your home, voluntarily or not, it is all but certain that it will no longer fetch the same price it did prior to the crash.
This is never good if you actually own or are paying off your home, but particularly bad in the latter case. You can easily wind up underwater on your mortgage, and that is going to severely limit your options.
What Does Being “Underwater” on a Mortgage Mean?
Being “underwater” on your mortgage simply means that you owe more to your lender than the house itself is actually worth. This is dictated by market conditions.
This can happen for various reasons, but when it comes to a dollar collapse this will be the case for a great many homeowners.
The reason why being underwater is so dangerous is because it severely limits your ability to refinance or even find another lender if needed, as no one will want to lend more than what the house is worth.
This can leave you highly vulnerable to foreclosure if you fall behind on payments.
If Owe Money on Your House, You Still Owe It No Matter What!
The next most important thing to know is that if you still owe money on your mortgage you must still make your payments in accordance with the terms of your loan.
Mortgages are considered secured debt, meaning that the creditor can take possession of your property if you are not paying in accordance with the agreement, and financial crisis be damned.
There is no time-out, no do-overs, no “so sorry”: it is business, and you had better believe that every lender throughout time has found a way to collect on collateral when loans are defaulted on.
This happened en masse during the 2008-2009 housing crisis, it happened during the Great Depression, and it will happen during the next one, whatever they call it in hindsight.
Lenders Will Not Forgive Debt Because of Economic Crisis
You don’t need me to tell you just how serious entering into a mortgage agreement is, and that is especially true when it comes to surviving a currency collapse.
You might hope for some leniency due to the circumstances, or expect the lender to forgive your debt because of the events that are affecting everyone and every business (even them) but you’d be wrong.
Lenders are under no obligation to forgive a debt simply because it has become too difficult to pay, and they are not going to do it out of the kindness of their hearts. The only thing they are obliged to honor is the exact terms of the mortgage agreement.
They are lengthy, dry, complicated, and borderline indecipherable for the average person, but they are still a legal contract and will be enforced as such when the time comes.
For this reason, it is imperative you understand all the terms of the contract, every line and letter, so you don’t get jumped by a “gotcha” clause when you can least afford it.
We will talk about a few such examples in just a minute.
What is Foreclosure?
If you do default on your mortgage, even through no fault of your own, the lender will foreclose on the house and seize it to pay off the debt.
Generally, you can only miss a payment or two before the bank starts the foreclosure process.
In just a few weeks you could be bounced out of your home by the sheriff with all of your possessions set out by the curb- no mercy given and none expected.
This is yet another reason it is so important to understand the terms and conditions of your mortgage.
Some lenders have clauses in the agreement that allow them to accelerate the loan if you miss a payment, which means they can call the entire amount due immediately; no more installments.
This will definitely catch you off-guard if it’s in there and you weren’t aware of it.
Remember: though your home likely means everything to you it is just one of many, many, many assets for your lender.
A piece to move across the board of the financial games they play to make untold fortunes. That’s how the business works.
Now, it is not impossible that your lender will be willing to work with you to help you overcome difficulties, especially if you have a good payment history.
You Might Be Able to Modify Your Mortgage or Get a Forbearance
If you are feeling the economic squeeze or are facing other losses that mean you’ll be late with a payment or just unable to pay on your mortgage, you need to contact your lender and let them know.
In many cases, you can get your mortgage modified so that payments are reduced for a period of time or have the terms changed to make it more affordable for you.
You may also be able to get a forbearance on the loan, which would reduce or suspend payments for a set amount of time.
These are all potential options available to you that might make the difference between facing foreclosure and staying put in your home, even if you have to tighten your belt. But, it must be said again, don’t count on it!
Beware Adjustable Rate Mortgages
One of the single, biggest “gotchas” that could sink you during an economic collapse, if you are still making mortgage payments on your house, is an adjustable rate mortgage, commonly abbreviated ARM.
An adjustable-rate mortgage is exactly what it says: a type of home loan where the interest rate is variable, changing periodically throughout the length of the loan.
This means that borrowers are charged different interest rates at different times during their loan’s life cycle and can be either higher or lower than original fixed-rate mortgages.
ARM loans nominally provide flexibility for homeowners by allowing them to take advantage of lower interest rates when available and they could POTENTIALLY save money in the long run.
However, ARMs will likely sink you when the dollar collapses if they don’t have a manageable cap or limit set on the rate: you could be hit with a massive increase in your monthly mortgage payment and have no way whatsoever to pay it.
You’d basically be facing foreclosure as the only option.
This is exactly what happened to countless homeowners back during the “Great Recession” of 2008-2009 and, because we are facing all the same conditions in place (plus, some have argued, even more extreme ones), it is not out of the question that it could happen to you too.
Think twice before you sign on the dotted line for an ARM! You might wind up losing yours, and a leg…
What Can You Do to Save Your Home in the Event of a Dollar Collapse?
The best thing you can do is to be prepared ahead of time. If you are already dealing with debt and other financial obligations, this is especially important.
With interest rates likely to skyrocket when the dollar falls, make sure that you have enough cash on hand to put a big dent in your loan balance.
That way, you will be able to pay off the debt quickly and avoid the huge payments that are bound to come with an economic collapse.
If you have not yet gotten a mortgage, remember this: always read the fine print and understand the terms. If you don’t, seek help from a trusted financial adviser.
The post So, If the Dollar Collapses What Happens to My House? appeared first on Survival Sullivan.