One of the biggest benefits of homeownership is that a well-maintained home will likely go up in value every year. Black Knight, Inc., a financial services company, estimates that the national average for home appreciation is 3.7% per year. The equity that you are earning while your home is appreciating comes from the difference between paying down the balance on your mortgage and its gain in value.
One of the most significant changes that you can take advantage of, if your new equity position is 20% or higher, is that you will be able to ask your lender if you can eliminate paying monthly private mortgage insurance and potentially save over a hundred dollars a month. When your home’s value rises, the loan becomes less risky for the lender because your loan-to-value ratio decreases. You will need to pay for a new appraisal to validate the increase in value.
Another advantage of gaining more equity in your home is that you can refinance to a lower interest rate because you are now a stronger borrower than when you first bought your home.
Increased equity from the increase in the value of your home enables you to get cash for home improvements with a cash-out refinance. Home improvements will continue to maintain your home’s condition and increase its value into the future. Your equity can also be accessed for other debt consolidation, paying bills or for emergencies.
Please contact me so we can discuss how an increase in equity in your home can benefit your financial well-being.