Category Archives: Financial Investment in Real Estate

How to use your home’s equity to your advantage

_equity_money-2724235_960_720

Your most valuable asset is around you all the time. It is above you, it is below you and in many cases you do not realize how much it can do for you.

According to the Urban Institute in Washington, D.C., “Americans have a staggering amount of untapped equity in their homes.” How much? Altogether, $11,030,000,000,000. That is 11 trillion, 30 billion dollars.

Yet despite this huge wealth possessed by homeowners, using it is not as simple as writing a check. You have to capitalize on your home’s equity.

What Is Home Equity?
Your home’s equity represents the difference between its current market value and the money that you owe on it.

Let us say, for example, your home has a market value of $200,000, you made a down payment of $40,000 and you took out a $160,000 mortgage. At that point your equity is $40,000. You can always calculate this number by taking your home’s initial price and subtracting the amount you still owe.

Now, let us say 10 years later you have paid off $60,000 of your $160,000 mortgage. At this point you still owe $100,000 on your home’s initial price of $200,000 so your equity is $100,000, assuming the home’s value has remained the same.

A little at a time
Each month when you make a mortgage payment, some of your money goes toward interest, some goes toward real estate taxes and homeowner’s insurance (if the lender is collecting for these and making the payments on your behalf), and some goes toward paying off the mortgage itself. This last portion grows your equity because it subtracts from the amount you still owe.

Your home equity can also grow if your home increases in value because the amount you still owe has not changed. A rise in value may be due to increased home prices in your area and/or improvements you make to the home.

Market home prices may rise and fall from one year to the next but given enough time, most real estate tends to increase in value. For example, current economic forecasts from CoreLogic project a 4.8 percent increase in home prices year over year in 2017.

Gaining access to your equity
Now that you understand what equity is and how much equity you have, your next question may be “How do I use it?”

Your first step is to contact a knowledgeable mortgage professional. They will be able to answer your questions as well as show you loans that use your home as collateral. You will want to do your research to determine which type of loan is best for you. You should also take the time to compare interest rates, offers, and loan features.

And if you are age 62 or older, you are also eligible for additional home equity options such as a Home Equity Conversion Mortgage (HECM), which is an FHA-insured Reverse Mortgage loan. This loan may be taken as a lump sum, a line of credit, through fixed monthly payments or a combination and the loan can never be frozen or reduced.

The equity in your home empowers you with several financing options and the specifics of each loan may vary from lender to lender, so ask questions and do your own research. Once you understand all your options you will be able to determine which loan offering allows you to make the most of your most valuable asset.

To learn about HECM Reverse Mortgage loans and other special home-equity options available to homeowners 62 and older, visit www.reversemortgage.org/HomeEquity. v

The State of the Union: Real Estate Edition

state of the unionYesterday, the National Association of Realtors released their quarterly report regarding the statistical news of existing-home sales. It has shown that while we have been on a gradual upswing as of the past three months, our summer season ended with a definite decline come August. Now, this news is not to be taken as bad news; there has not been anything terrible happening in the market. We are seeing definite improvement from last year across the board. However, there has been a stall in the constant increases we’ve been experiencing nationwide.

If we break it down by region, the only one that hasn’t had a change in existing-home sales at all from July is the Northeast. The mid-west declined 1.5 percent, the South was down 6.6 percent and the West down 7.8 percent. These numbers may seem to be cause for concern but all of these regions have an average of a 6 percent increase from last year.

Now these statistics aren’t real estate sales across the board. To be clear, existing-home sales according to the NAR consists of completed transactions that include single-family homes, townhomes, condominiums and co-ops. These sales have fallen 4.8 percent from July, but as a yearly average, they are 6.2 percent above a year ago. I know, it’s a lot of numbers.

Experts are saying that the reason for this stall is a lack of inventory in areas like the South and the West. This has caused the prices for said homes to spike drastically to capitalize on the lack of supply to demand. NAR chief economist Lawrence Yun states, “With sales and overall demand higher than a year ago and supply mostly unchanged, low inventories will likely continue to limit options for those looking to buy this fall even with the overall pool of buyers shrinking because of seasonal factors.” Basically, the lack of new home construction isn’t reflecting the needs of those in various areas. This increases prices, which has been the issue for the stall. Thankfully, the price appreciation for the limited supply of homes have begun to come out of the unhealthy growth rate and started to even out, which is good for the overall sales.

But rather than end this post on a bad note, here’s something to keep in mind as we head into the next quarter: As our job market continues to improve, it will trickle down to wage increases. This will increase homebuilding and improve home inventory, which will continue to slow down price increases. So in the end, it will all even out. Guess we’ll just have to see what the next quarter has in store…

Try 300 custom newsletters risk-free for 3 months -$50.00/mo! (plus shipping) Simply fill in the form and our representative will contact you within 24-hours to finalize your order (newsletter only offered in US).

Rent-to-Own Isn’t as Easy as You May Think

_tma_Rent-to-own

Today I ran across a fact about current housing market that made me stop in my tracks. Homeownership is at its lowest in 25 years. Wait, excuse me? You must have your facts wrong, sir. We can’t seem to slow down this incredible surge in today’s market! Unfortunately, I was mistaken. And the reason behind it is not what you think.

According to the U.S. Census, the rate of homeownership fell to 63.7%, a rate that hasn’t been matched since 1990. But if housing demand is rising and pricing is rising, why isn’t homeownership? The upswing in the economy is actually having a reverse effect on the housing market. Hold on. Let me explain…

Because there is a rise in the economy, there are more millennials moving out of their parents’ homes and into a rental property. This increases the demand of rental properties. In fact, rental vacancies are at an all-time low. The more demand there is for these soon-to-be rental properties, the price for said properties begins to rise, which is what we can see from the latest market reports. Unfortunately, the rise in pricing for these rental properties doesn’t allow first-time buyers to buy. Instead, these single-family homes are bought by investors and rented.

And therein lies the homeownership hit. It really comes down to inventory and these days there isn’t enough of it. And sadly, this leaves a lot of lower and middle-class families unable to join the ranks of homeowners. The more prices rise and expectations are met and/or exceeded, the more homeownership will drop. David Blitzer of S&P Dow Jones Indices states, “Home prices continue to rise and outpace both inflation and wage gains. If a complete recovery means new highs all around, we aren’t there yet.”

Try 300 custom newsletters risk-free for 3 months -$50.00/mo! (plus shipping) Simply fill in the form and our representative will contact you within 24-hours to finalize your order (newsletter only offered in US).

Profile of Home Buyers and Sellers

Presentation: 2014 Profile of Home Buyers and Sellers