Aside from it’s obvious profit generating effect, rising home values provide homeowners with several possible benefits. In fact, homeowners not selling can miss these benefits when not paying attention.
Homeowner’s Can Save When Values Rise
For homeowner’s staying put as home prices go up (in other words not selling), several benefits rise up along with their home’s value. In fact, simmering real estate values not only present opportunities to save money – they create opportunities to improve your home.
Three major benefits sparked by rising property value for non-selling homeowners are:
Eliminate Mortgage Insurance
While home values cruise to new altitudes, existing homeowner’s equity levels also rise. This uniquely favors buyers who purchased with less than 20% down who also have a monthly mortgage insurance payment.
Whether a lender removes mortgage insurance without a fight, or the homeowner must refinance pout of MI – newfound equity helps eliminate that pesky payment. Side note – mortgage insurance wasn’t a bad thing, just not a house guest you want forever.
Finance Home Renovations
In addition, expanding home equity creates room to finance home repairs and/or renovations. Many buyers purchase their home expecting to renovate later when there’s enough equity to do so. Later might become sooner than later in a rapidly appreciating home market.
The more equity a homeowner has the easier financing renovations projects becomes. For example, financing a new pool, new cabinets or new flooring is easier with more equity.
Consolidate Non Mortgage Debt
Lastly, gaining equity is a key to consolidating debt via a mortgage refinance. Typically, debt consolidation refi loan amount caps at 80% of the home’s value (VA allows 90% loan to value).
More equity means more room for combining debts into one mortgage. For example, debt consolidation loans often include auto loans or credit cards. Often, consolidating debt into a lower rate tax favorable mortgage can drastically improve one’s overall financial picture.