Home equity has been rising the past year at incredible rates, all thanks to a competitive housing market. Home owners are dipping into the cash flowing into their homes equity. How are they getting their hands on it? What are they spending that cash on? Most are creating more value in their home with the cash in hand.
Where are they spending the money?
Renovation spending has topped $152 billion in 2017, and will continue to increase an estimated 4.9 percent in 2018. This excludes renovations done by investors flipping homes or rental properties. Due to the increase in home equity, more home owners are choosing to renovate instead of building new.
More Aggressive use of Home Equity Cash
Others have gone to a more aggressive route, taking the money to make more money. Homeowners are also using the home equity cash to pay down other debts to lower payments or paying them off in full. Many are pulling the cash out to pay off or lower student loans and other credit debt.
A strong confidence among borrowers believe home
values will continue to rise, and are less likely to go upside-down on the mortgage. For some, the home equity cash is invested in the stock market. For others its buying rental property for additional income. Rental demand has risen due to a seller favored market ultimately raising home costs, creating a much easier path to become a landlord.
How Is Equity pulled out of a Home?
Equity is what you now “own” on the home. For example, if you owe $150,000 on your home and your home appraises at $250,000. You have $100,000 in equity. When you refinance that home in a Cash-Out refinance you can tap that equity. The full $100,000 is available to pull however, lets say you pull $30,000. Your new refinanced loan amount you owe will be
$180,000, $150,000 for what you previously owed plus the $30,000 in equity pulled out. The cash is yours to do as you please, renovate, pay down debt, etc.
It is important to have good reasoning to pull out equity rather than to just have the cash on hand.
Is Pulling Out Home Equity Right For Me?
Luckily, there are many mortgage options available that might be right for you. Typical mortgage options are available from 15-30 year loan terms, along with VA, FHA and Conventional with equity options. Some require you have a certain equity to home value percentage ratio, or a target credit score.
- Cash-Out Refi: This allows you to simply pull out equity from the home
- HELOC: Some banks give you an option of putting a line of credit on your home
- Conventional Refi: Using that home equity to pay down your mortgage into a conventional loan, ultimately eliminating PMI/MIP (mortgage insurance)
If you are interested in what your home equity mortgage options are, ask and see what is possible.
Apply here to see what your options are.