A Decade of Housing Healing:
Has it Created Opportunity for You?
It's now been around a decade since the big housing market crash ...
While many housing markets have cooled a bit, as of late ... the Home Equity Report for the last quarter of 2018 (and a quarterly overview of the distribution of equity across all U.S. single-family residential properties with a mortgage) by CoreLogic clearly shows that some healing has taken place ...
"U.S. homeowners with mortgages (which account for roughly 63 percent of all properties) have seen their equity increase by 8.1 percent year over year, representing a gain of nearly $678.4 billion since the fourth quarter of 2017."
That news ... paired with current stable interest rates and increased housing prices ... has many homeowners wondering ...
"Has the healing that has taken place affected me? Am I sitting on untapped home equity?"
The number of inquiries I'm receiving regarding this issue is definitely on the rise. Those inquiries typically revolve around these issues:
- Debt Consolidation: Existing debt is paid off via a new loan, creating one loan with one singular large debt versus multiple loans with small balances. Typically the new loan's terms are more favorable and include a lower interest rate.
- Student Loan/Credit Card Payoffs: Borrowers hope to pay off or reduce balances on credit cards with double-digit interest rates or on high balance Student Loans that seemingly last forever.
- HELOCS: A borrower's HELOC (Home Equity Line of Credit) is coming due or soon to be coming due. Instead of renewing the HELOC, they wish to convert the HELOC into a Fixed-Rate Loan.
- Reducing Mortgage Term: Borrowers wish to reduce their terms from their current mortgage, going from 30-year Fixed to 15 or 20-year loan terms. The debt is paid down faster and many times positions borrowers more advantageously later in life.
As shown above, many housing markets across the U.S. have experienced market appreciation. But are rising housing prices alone enough to allow U.S. homeowners to borrow on their property again?
Are borrowers finding that they can erase their debt that carries higher rates of interest? Can they ease the financial pressures that drain their monthly cash flow or eliminate that debt that has proven hard or impossible to pay off or pay down?
The answer is Yes ... No ... and Maybe ...
For homeowners that bought or refinanced their homes within the last 10 years and find themselves carrying an interest rate below 5%, there may be financing options to consider. Those options might include:
- A Second Mortgage: A Second Mortgage uses any equity available in your home as security against the first mortgage. A lien is placed on your property which is subordinate to the first mortgage. Second Mortgages typically have higher interest rates than first mortgages.
- A Home Equity Line of Credit (HELOC): Keeping your current low-interest rate mortgage and not pursuing a Refinance may be the better option for you to take.
(And yes, this is the very same type of loan mentioned above as something some borrowers may wish to eliminate. But just as the HELOC made sense for them at the time they initiated it, a HELOC may make sense for some borrowers now.)
- Cash-Out Refinance Loan: This is a loan where you finance a new mortgage for more than your existing mortgage balance and then pay off the existing mortgage. You get a check for the difference, or that same excess money is directed from the closing to pay off Creditors and balances owed to them.
For many reasons, a Cash-Out Refinance may be the perfect financing solution you seek. In cases where a Cash-Out Refinance is sought, an Appraisal will be performed. The Appraiser will determine the Current Value of your property.
Ultimately, the answer and solution you seek are a very personal one ... one that should be based and made solely on YOUR personal finances and goals, no one else's. There simply is no broad "one-size-fits-all" answer.
So ... how do you discover if equity exists in your home? HOW do you go about reaching that financially sound conclusion? How do you proceed?
In order to find an answer and the financing option that serves your personal needs best, you need to reach out to an experienced Loan Officer.
Only through a complete and thorough review of your credit and finances can you discover if any advantageous financial solutions exist.
With the help and guidance of your Loan Officer, comparisons between the options revealed through this process will be weighed ... and the pros and cons of each deliberated.
Then and only then can you make an intelligent informed decision.
Now I know conducting a financial review sounds boring ... and I also understand it demands some effort on borrowers' part. But the effort is needed in order to find the answer you're searching for ... and well worth it.
Peace of Mind. Because, should you decide to move forward with new financing, you then do so knowing that you have considered all the avenues open to you. You have chosen the form of financing that will fulfill both your short-term needs and long-term goals.
Monetary stress relief. Funds to tackle needed and desired household repairs and improvements. Peace of mind. No matter your end goal, your equity and money will be working hard on your behalf.
In the Chicagoland area - Illinois - Wisconsin, reach out to me with your questions. I'll be happy to hear from you and assist you in reaching your goals.
* When in need of Mortgage info, guidance, or service when buying, refinancing, or investing in a home in New Lenox - or elsewhere in Chicagoland - IL & WI, contact me.
I'll be happy to put my 40+ years of mortgage experience and expertise hard to work on your behalf.
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