With the current hot housing market and home prices rising, more and more people have decided to stay put in their homes. But now that you have decided to stay in your home, you should take advantage of your home’s equity. In the first quarter of 2021, the average homeowner gained approximately $33,400 in equity during the past year. Idaho, California, and Washington experienced the largest average equity gains at $70,900, $69,600, and $65,800, respectively, according to CoreLogic.
But how do you build more equity in a home while simultaneously enhancing your everyday life? The answer is by making home improvements that add value to your property. Remember that not all home improvements add value to your home. Be careful with what you choose to improve. We have listed the top 2 home improvements that will build your home’s equity in this market and how to get access to your home’s equity.
Most people consider the kitchen to be the heart of the home, and because of this, updates in this room pay off. According to HGTV, you can expect to recoup 60%-120% of your investment on a kitchen remodel, as long as you don’t go overboard. You should never make your kitchen fancier than the rest of the house.
Energy Efficient Improvements:
In California, we know that climate control is a must. We can experience some long heat waves and extremely cold winters. These events add additional cost to our power and natural gas bill; this does not even account for the power outages and rolling blackouts we have experienced for the past 2 years. But you can cut those costs by installing energy-efficient insulation that keeps you from heating or cooling the outdoors. Or considering a solar system that will also get you a tax rebate at the end of the year. There is still a list of items that qualify for tax rebates. Visit the IRS website to see the list. Focus on smaller projects that make your home more appealing and energy-efficient.
How To Pay For Your Home Improvements With Your Home’s Equity:
Home equity loan or line of credit: These second mortgages turn your home’s equity into easily accessible funds. Home equity loans payout in a lump sum, while home equity lines of credit, or HELOCs, are a line of financing you can borrow against over time. Both home equity loans and HELOCs have interest rates, fees, monthly payments, and tax advantages to consider.
Cash-out refinance: If you have built up equity but don’t want a second mortgage, consider a cash-out refinance. You can take out a new home loan for more than your current mortgage balance and, after closing, the proceeds will be paid to you in cash. A cash-out refinance typically won’t make sense if your equity is limited or current mortgage rates are higher than your rate.
If you are thinking about a cash-out refinance or home equity loan, schedule a consultation with our team. We can help you calculate your current home’s equity and how much you can take advantage of while still building your equity.
Thank you for taking the time to read this article.
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