The value of your home continues to rise. Many homeowners are experiencing significant gains to the value of their homes and their home equity, especially this past year.
Home price gains, which are tied to home equity, have risen at a rate not seen in more than six years.
According to CoreLogic, the home price index increased by 8.4% in October, up from 7% during the previous month. Some cities like Phoenix, Seattle and San Diego recorded increases of up to 12.7%.
Earlier in 2020, restrictions related to the pandemic led to a deacceleration in gains to home prices, but that did not last. Since late spring, monthly reports have showed a persistence in home price gains across the nation.
Part of the reason for the success in the real estate market is ultra-low interest rates that allow more homebuyers into the market. The pandemic has also reframed priorities as more people migrate from urban cores to suburban neighborhoods, where home prices tend to be more manageable.
With recent developments to vaccine availability and new stimulus measures, 2021 may pick up where 2020 left off. Recent stimulus and other consumer protections could lead to bigger demand in the housing market and thus keep prices moving upward.
Current homeowners can get in on the action as well. While you may have no plans for selling your home, you might be pondering how to maximize home equity.
Home equity is earned as the value of your home increases relative to how much is owed. Similarly, making monthly payments will also chip away at the balance, which boosts home equity.
Through a refinance mortgage loan, borrowers can accomplish a number of financial outcomes that boost their flexibility thanks to their equity.
Refinancing a loan means replacing the existing loan with one that features more favorable borrowing terms. A lower-interest rate loan saves homeowners money on their monthly mortgage payment, which will add up to bigger savings over the life of the loan.
Equity can also come into play when you decide to refinance. Through a cash-out refinance, for instance, a homeowner can tap into equity and borrow against it.
You can access the equity to consolidate debt, pay for education or save for a rainy day.
Some homeowners decide to invest in their homes and use proceeds from a cash-out refinance loan to renovate their home, which will also boost the home’s value.