Do you know how much equity you have in your home? Are you leveraging that equity?
Equity-rich homeowners have a remaining balance on their mortgages that is 50% or less of the market value of their homes. If you’re in that camp, consider leveraging that equity in principally one or two ways:
- Secure a second mortgage in the form of a Home Equity Line of Credit (HELOC) that you can use to consulate debt, to tap when needed for emergencies, to utilize for the purchase another investment, and to help finance a second home that will appreciate over time. (Home appreciation will now occur at a much slower rate than two and three years ago, but real estate remains a great investment. Homes have shown to appreciate, on average, 4 percent annually.)
- Recover that equity by selling your home to downsize to another, to right-size, to be closer to family, and/or to obtain a home that provides your new sought-after lifestyle.
Many equity-rich homeowners have stayed out of the home-buying market to preserve their all-time-low mortgages at or around 3 percent. Today, interest rates hover around 7 percent – a rate that buyers and sellers fail to recognize as “normal” along the historic spectrum. They are unable to see beyond the anomaly of the Covid-pandemic period. Since mortgage rates are not expected to drop much below 7 percent, is it time for you to consider your next move?
To soften the blow of paying a higher rate, remember, that couples can deduct their mortgage interest paid during each tax year on the first $750,000 of your mortgage debt for your primary home or a second home. (If you are married filing separately, the limit drops to $375,000.)
Since 2019, median home list prices increased 38.4% nationally, while the average home’s price per square foot increased 54.9%.
Nevertheless, mortgage delinquency rates have remained at historic lows despite the inflationary pressures and higher costs of almost all non-mortgage, homeownership-related expenses, according to the chief economist at CoreLogic.
Despite current relatively high mortgage rates, many homeowners remain so eager to move that they’re willing to take on a higher interest-rate burden. Where do you stand?
Call The Beth and Steve Team at Keller Williams to discuss your best options. Steve Feldman: (617) 417-3125; SteveF@kw.com. Beth Davis: (617) 504-8499; Beth.Davis@kw.com