Tag Archives: home equity

Home Equity : What It Is and Why It Matters

It is often said that home ownership builds wealth. So, what is home equity, and how can it enhance your net worth?

What is home equity?

Home equity is the current market value of your home, minus what you owe. You’re looking for a positive number. Any gain comes from:

  • Paying down the principal balance on your loan.
  • An increase in market value over time.

How does home equity work?

Building home equity is a bit like investing in a long-term instrument, like bonds. Your money is, for the most part, locked up and not spendable.

There are some ways to tap it, but wealth is created over years as your share of “free and clear” ownership of the house increases.

It seems simple enough, but home equity is not guaranteed. Just ask any homeowner who went through the last housing bust. That’s when home equity fell sharply for many homeowners — and, in some cases, completely disappeared.

As a rule, building home equity is a slow climb, at best. U.S. residential year-over-year home price appreciation averaged 1.89% from 1997 to 2017, adjusted for inflation, according to CoreLogic, the Bureau of Labor Statistics, and the Urban Institute.

However, behind that average are some major year-over-year price swings during the same period, ranging from a gain of 12.6% to a drop of 18.1%, according to the Urban Institute.

When it comes to short-term home appreciation, sometimes it’s more of a bungee jump than a climb.

How do you find out how much equity is in your home?

home equity calculator can give you an idea of what your home is worth and how much equity you may have, if you’re thinking about selling your home or borrowing a chunk of your equity.

An appraisal will really nail down the value of your house.

Why is home equity important?

Home equity can be a long-term strategy for building wealth.

Mortgage payments reduce what you owe while your home gains value, so paying on a house has been called “a forced savings account.”

This is unlike virtually every other asset purchased with a loan, such as vehicles, which lose value while you pay them off.

A growing number of U.S. homeowners are amassing “impressive stockpiles” of home equity wealth, according to Daren Blomquist, senior vice president at Attom Data Solutions.

At the end of the second quarter of 2017, over 14 million U.S. properties were considered “equity rich” — meaning the debt on the property was 50% or less of the home’s current market value.

That’s about 24% of all owner-occupied homes with a mortgage.

Home equity takes time to build

Another nutrient helping to grow home equity wealth is time. Homeowners who stay in their homes longer are more likely to accrue equity.

In the second quarter of 2017, people selling their homes had lived there an average of more than eight years. That was the longest ownership period since Attom began tracking homeownership tenure in 2000. Before the recession, people were staying in their homes an average of about four and a quarter years, Attom data show.

“That’s a paradigm shift — a more conservative approach to homeownership and building wealth through homeownership,” Blomquist says.

Just 10% of homes owned for less than one year are considered equity rich, according to ATTOM.

You don’t have to sell to tap the profit inside your home. Instead, you can borrow against that value with a home equity loan or line of credit. A home equity loan will provide you a lump sum; a HELOC allows you to draw on the available balance as you wish.

Home equity is not a get-rich-quick scheme

Building home equity is definitely a long-term proposition. Blomquist says wise words from one of his relatives may state it best.

“My wife’s great-grandfather — who bought property in Southern California a long time ago — his advice was, ‘You take care of a piece of real estate for 20 years, it’ll take care of you forever.’”

From our friends at Nerd Wallet


Not impressed with your kitchen or bathroom? Dream big with your space! Tackle your next home project with our Home Equity Special — rates as low as 5.21% APR*! Connect with our Loan Specialists today at 503-275-0300 Option 2 or apply online. We can’t wait to help make your dreams come true!

 

*Rate quoted valid for second lien loans only. Available in Oregon, Washington & Idaho. Minimum loan amount is $25,000. Maximum loan amount is $100,000. Maximum loan-to-value is 80%. Rate will vary depending on term, loan-to-value and credit qualifications. 10-year maximum term. Payments: On a $50,000 loan with a 120-month term at 4.99% interest rate (5.21% APR), your monthly payment would be approximately $531.21 or $10.64 per $1,000 financed. Payment approximation does not include taxes or insurance. Offer ends 5/31/2019

Fall Back in Love with your Home

Many of us reach a point where we begin to feel a little blah about our home, but moving is not always an option. Here are some tips on how you can get a “new” home without the moving truck.

Little changes can have a big impact
Painting walls, changing light fixtures and knobs, and adding curtains and plants can give your home a completely different look for only a few hundred dollars. Rearranging furniture, artwork, and knick-knacks can also freshen things up, and the only cost is a little time.

Expand
Converting an unfinished attic or basement can be a great way to get extra space at a fraction of the cost of building an addition. Adding a deck is another fairly simple way to increase your space. If you are hiring a contractor, be sure to get quotes from at least three and check their references.

Make the most of what you have
If expanding is not an option, you can still make your space seem bigger. Clean and throw away, donate, or sell anything you don’t need. If you have a little cash to spare, you can buy organizational tools, like shelves and hooks, and furniture that provides extra storage space, such as a coffee table or bed with drawers.

Need some extra funds to get started on one of the above projects?
Connect with a Loan Specialist and ask about our “Celebrate Summer” 12-12-12 Loan or if it’s a bigger project, a home equity could be an option – (800) 452-0915 option 2 | loans@usacu.org

Want more financial advice? As a benefit of belonging to USAgencies Credit Union, you have access to BALANCE, a free financial education and counseling service. Their certified counselors can answer your questions, review your credit report, and help you create a budget. Learn more about BALANCE.

 

6 Tips for Summer Energy Savings

The summer months bring sunshine, warm nights, and backyard fun + higher energy bills. Cut your costs with a few simple changes around your home.

  1. REPLACE YOUR OUTDATED AIR CONDITIONING UNIT. If you live in a home that’s over 20 years old, it may be time to consider purchasing a new, more energy efficient unit.
  2. ALTERNATIVE METHODS OF COOKING. Consider using your microwave or grilling outdoors. If you do need to use your oven, consider baking in the morning hours rather than in the heat of the day.
  3. AUTOMATE YOUR THERMOSTAT. Install a programmable thermostat to keep your home warmer during the day when you’re away at work.
  4. BLOCK OUT THE HOT SUN. During times of the day when the sun is at its hottest, pull your window treatments closed to block out warm rays.
  5. GIVE YOUR AIR CONDITIONING A BREAK. Cool your space down for less money with the use of oscillating room and ceiling fans.
  6. TAKE COOLER, SHORTER SHOWERS. Decrease the duration of showers to save on your hot water usage and consider installing a tankless water heater.

Need help with making some of these energy improvements? Connect with USAgencies for details on our Home Equity LoansLOANS@USACU.ORG | (503) 275-0300 option 2.