It’s no secret that home values have been on the rise for the past several years. In fact, according to Zillow’s latest report, they are projected to continue increasing through 2022.
Keep reading to learn more about the current housing market trends and what this could mean for you!
Today’s Real Estate Market
According to the Freddie Mac House Price Index (FMHPI), home values grew by 11.3% in 2020 and 15.9% in 2021. Many real estate experts predict that it will only rise further in 2022. Especially as the spring season approaches, you can most definitely expect the prices of homes to soar.
For the past few years, we’ve seen historically low interest rates which has spurred on buyers looking to purchase a home. We’re also still in the midst of a pandemic which has caused many people to reassess their living situation – resulting in a stronger buy demand for housing. On the flip side, there is a limited supply of homes available for sale which is causing prices to rise significantly.
But what does this mean for homeowners?
For homeowners, the jump in home prices is great news! It means your home is likely worth more than it was when you first purchased it, which can give you a nice little nest egg to tap into if you ever want to sell or refinance.
Consider refinancing your mortgage
If you’re a homeowner, there’s a good chance you’ve thought about refinancing your home at some point. And if your home’s value has increased, now is a great time to do it!
Here are a few of the best ways you can take advantage of today’s market to refinance your home:
With home values on the rise, many homeowners have built up significant home equity. If you need cash for home improvements, debt consolidation, or other purposes, refinancing can be a good way to access that equity. You can choose to get a cash-out refinance loan, which essentially means you are taking out a new mortgage for more than what you currently owe on your home. The difference will be given to you in cash, which can be used as you see fit.
Just be aware that a cash-out refinance will likely have a higher interest rate than your current mortgage. So, if you’re not planning to stay in your home for the long haul, it may not be worth it.
Get rid of private mortgage insurance
If you put less than 20% down on your original mortgage, you’re most likely paying private mortgage insurance (PMI). PMI is an insurance policy that protects the lender in case you default on your loan.
While PMI is a common requirement for low-down-payment loans, it’s an extra expense that you can get rid of by refinancing your home. Once your home value rises and you have at least 20% equity in your home, you can apply to have PMI removed.
Shorten your loan term
When home values rise, it typically means that your property is worth more than it was when you purchased it. This increased home equity can be used to your advantage by refinancing to a shorter loan term.
There are a couple of benefits to shortening your loan term when home values rise. First, you’ll build home equity more quickly. Having more equity gives you more options and flexibility if you ever need to sell or refinance your home in the future.
Second, by refinancing into a shorter loan term, you can save money on interest payments. If you can lower your interest rate by even a fraction of a percent, you could save thousands of dollars over the life of your loan. As a result, you will be able to free up some extra cash each month, which you can then use to pay down debt or save for other goals.
Sell your home
Finally, you could sell your home and move into something more affordable. With housing prices on the rise, this could be a great time to profit from your investment and downsize to something more manageable.
No matter what your goals are, refinancing can be a great way to use the rising value of your home to your advantage. If you’re thinking about refinancing your home, be sure to talk to a mortgage lender to see what options are available to you.No comments yet