Rising home values ​​can boost your mortgage refinance


Rising mortgage rates reduce mortgage refinance flow to a trickle. To date, many people who could have benefited from a lower rate have done so. However, if you’re thinking about refinancing but are hesitating because of interest rates, there’s something else to consider that can make a mortgage refinance interesting: rising land values.

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House prices are on the rise

Home prices rose 7.1% year-over-year in November, according to a national report just released by real estate analytics firm CoreLogic.

“Home prices continue to rise, with home prices in 27 states above pre-crisis levels,” Anand Nallathambi, president and CEO of CoreLogic, said in a statement. “Nationally, the CoreLogic home price index remains 4% below its peak in April 2006, but is expected to surpass that peak by the end of 2017.”

You may finally be able to enjoy the equity in your home

Even though mortgage rates increase, the appreciation of your home may allow you to make a mortgage move that you may not have previously qualified for. Here’s how higher home values ​​can affect your mortgage refinance opportunities:

Cash refinancing. If you’ve weighed a lower mortgage rate against loan costs and decided that a refinance seems like a draw, this could be the tiebreaker: a cash refinance. Leveraging some of your home’s value in a pullback refi can allow you to make improvements to your home and property. This adds value to your home in the long run.

Refinance mortgage loan insurance. As home prices have soared, fewer American homeowners are underwater or facing “negative equity” — owing more on a home than its market value. Over the past five years, more than 10 million households have exceeded negative equity. In December, Zillow research found fewer than 5.3 million homeowners with a mortgage are underwater. That’s down from the 2012 peak of over 15.7 million owners.

“If someone has an FHA loan, for example, they’re paying between 0.85% and 1.35% for mortgage insurance,” says Joe Parsons, branch manager at Caliber Home Loans in Dublin, California. Having an equity of 20% or more will often allow a lender to waive the mortgage insurance requirement when refinancing from a Federal Housing Administration loan to a conventional loan, he says. Home equity is the market value of the home minus the amount owed.

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Don’t Forget the HELOCs

A home equity line of credit can provide the same access to your home equity as a home equity loan, but with the added benefit of allowing draws on your line of credit as needed. When you use a HELOC for the right reasonsit can be a wealth creation strategy.

There is a possible hitch: HELOCs usually have adjustable interest rates – something to consider in a rising interest rate environment.

Your monthly payment can increase regardless of your refinance rate

Refinancing is often an effort to reduce the interest rate, loan term, or monthly payment. But despite your best efforts, in a market where home values ​​are rising, you could see your monthly payment go up. This can happen when you put property taxes and insurance premiums in escrow and split the annual costs in proportion to your monthly payment. With a higher home value, both can increase.

Save thousands on your loan by comparing competitive refi quotes

Get personalized quotes on our lender marketplace and negotiate your best rate. Answer a few questions to get started.

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