Home Equity
2020 - Planning for Home Equity
Home Equity is a homeowner's interest in their home and generally their most valuable asset. It can increase over time if the property value increases or the mortgage loan balance is paid down.
(Example performance)
Triangle Area has benefited from a steady 6% average value increases year over year. Here is some advice to help you can manipulate your home equity to take full advantage of that performance.
3 Ways to Increase Home Equity
Pay down YOUR loan
Add an additional 1/12th to each monthly payment, or choose bi-weekly payment options. One extra payment per year dramatically reduces the interest you will pay over the life of your loan, decreases the principle balance faster and can reduce the loan term by as much as 7 years.
improvements
Make strategic updates to your home. Mechanical and cosmetic life cycles are about 15 years, so if your home was built before 2005 you should be able to significantly increase the market value of your home by updating key systems and living spaces.
time/market appreciation
Generally speaking, property values will increase over time as more and more people move to the Triangle Area and housing demand continues to remain strong. This performance will of course vary based on neighborhood location and amenities, structural condition and connectivity to commutes and retail— make smart purchase decisions with these factors in mind.
Leverage Your Lending Power
Home Equity Loan/Line of Credit
Use existing home equity to make home repairs and improvements that will increase your home value in preparation for sale or refinance
Use existing home equity to consolidate other debt at a lower rate and pay off debt faster
Reduced origination costs compared to purchase/refinance
Interest may be 100% tax deducible (consult your accountant)
Refinance
As you pay down your original loan balance or the market value of your home increases your loan to value ratio will change, possibly qualifying you for a better rate
If you purchased using an adjustable rate mortgage, refinance to a fixed rate
If you purchased with less than 20% down and your loan to value ratio has since increased you may qualify to remove your monthly PMI, or mortgage insurance payment.
Increase your loan amount to take a “cash-out” lump sum of your existing home equity to make repairs or consolidate other debt
Reduced origination costs compared to purchase
