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Home values have been rising since the pandemic began now is the right time for homeowners to unlock their home equity.
According to the National Association of Realtors in June, the national median existing-home price hit a record high from $294,400 in 2020 to $363,300.
According to a May report from the mortgage data firm Black Knight, this has resulted in the average U.S. homeowner having $153,000 in tappable equity.
According to CoreLogic’s Quarterly Homeowner Equity Insights Report, collectively, homeowners across the country have seen their equity blow up by close to $1.9 trillion from the first quarter of 2020 to the first quarter of 2021.
Guy Cecala, the chief executive, and publisher of trade publication Inside Mortgage Finance said, this has given homeowners a chance to get their hands on a quick dose of funds.
The three ways to tap into your equity are:
1 - Cash-out Refinance
Where a homeowner can take out a new mortgage up to 80 % of their home’s value for more than what they owe on their current mortgage and utilize the cash of the difference between the two loans.
2 - Home Equity Line of Credit
This line of credit allows homeowners to borrow money against their homes. They can borrow up to 85 % of the value of their home. One advantage of HELOC is that one needs to pay interest only on the money they borrow.
So it is a nice feature if you’re planning to make a few home improvements and do not know what the costs of building material would be.
3 - Home Equity Loan
A home equity loan comes with a fixed interest rate so the borrower will have a consistent monthly payment. With this loan, the borrower receives a lump sum of cash and pays the loan back in installments anywhere from 5 to 30 years.
Before choosing any of the options experts suggest assessing how do you plan to spend the cash before you unlock your home equity.
It is very important to have your goals clear whether you use the funds to make home improvements and will raise the value of your home or use it to pay off high-interest debts
Reference Source: The New York Times
