Four Ways You Can Use Your Home Equity

If you’re a homeowner, odds are your equity has grown significantly over the last few years. Equity builds over time as home values grow and as you pay down your home loan. And, since home prices skyrocketed during the ‘unicorn’ years, you’ve likely gained more than you think.According to the latest Equity Insights Report from CoreLogic, the average homeowner has more than $274,000 in equity right now. That much equity can help you achieve certain goals. In a recent article, Bankrate elaborates: “While the pandemic created serious challenges, the silver lining for anyone who owned a home was the sizable equity gain. Understanding how home equity works, and how to leverage it, is important for any homeowner.”Here are a few examples of how you can put your home equity to work for you.1. Buy a Home That Fits Your NeedsIf your current space no longer meets your needs, it might be time to think about moving to a bigger home. And if you've got too much space, downsizing to a smaller home could be just right. Either way, you can put your equity toward a down payment on a home that fits your changing lifestyle. A real estate agent can help you figure out how much equity you've got and how to use it when buying your next home.2. Reinvest in Your Current HomeRenovations are a great option if you want to change your living space, but you aren’t yet ready to make a move. Home improvement projects give you the freedom to tailor your home to match your needs and personal style. But it's important to consider the long-term benefits certain upgrades can bring to your home’s value. Lean on a real estate professional for the best advice on which improvement projects to prioritize in order to get the greatest return on your investment when you sell later on.3. Pursue Personal AmbitionsHome equity can also serve as a catalyst for realizing your life-long dreams. That could mean investing in a new business venture, retirement, or funding an education. While you shouldn’t use your equity for unnecessary spending, using it responsibly for something meaningful and impactful can really make a difference in your life.4. Understand Your Options to Avoid ForeclosureToday the number of foreclosure filings remains below the norm, so there’s no need to fear a wave of foreclosed homes flooding the market. But unfortunately, there are still some homeowners who experience the foreclosure process each year. If you’re facing financial difficulties, having a clear understanding of your options and how your equity can help is crucial. Equity can act as a financial cushion that can be used in times of unexpected challenges or unforeseen circumstances that may disrupt your ability to make mortgage payments on time.In an article, Freddie Mac explains it this way:“If exiting your home is the best option for you, selling with equity may be a good option. When selling with equity, you are using the proceeds from selling your home at a higher price than the amount you owe on your mortgage to pay off your remaining mortgage debt.”Bottom LineYour equity can be a game changer in reinvesting in your needs, pursuing your goals, and even helping you avoid foreclosure during difficult times. If you’re unsure how much equity you have in your home, connect with a local real estate professional so you can start planning your next move.

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Housing Market Forecast for the Rest of 2023 [INFOGRAPHIC]

Some HighlightsWant to know what experts say will happen in the rest of 2023? Home prices are already appreciating again in many areas. The average of the expert forecasts shows positive price growth.Where mortgage rates go for the rest of the year will depend on inflation. Based on historical trends, rates are likely to ease as inflation continues to cool.Even though low inventory continues to be a challenge, experts project 5 million homes will still sell this year. That pace should pick up if rates come down.

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How Inflation Affects Mortgage Rates

When you read about the housing market in the news, you might see something about a recent decision made by the Federal Reserve (the Fed). But how does this decision affect you and your plans to buy a home? Here's what you need to know.The Fed is trying hard to reduce inflation. And even though there’s been 12 straight months where inflation has cooled (see graph below), the most recent data shows it’s still higher than the Fed’s target of 2%: While you may have been hoping the Fed would stop their hikes since they’re making progress on their goal of bringing down inflation, they don’t want to stop too soon, and risk inflation climbing back up as a result. Because of this, the Fed decided to increase the Federal Funds Rate again last week. As Jerome Powell, Chairman of the Fed, says:“We remain committed to bringing inflation back to our 2 percent goal and to keeping longer-term inflation expectations well anchored.” Greg McBride, Senior VP, and Chief Financial Analyst at Bankrate, explains how high inflation and a strong economy play into the Fed’s recent decision:“Inflation remains stubbornly high. The economy has been remarkably resilient, the labor market is still robust, but that may be contributing to the stubbornly high inflation. So, Fed has to pump the brakes a bit more.”Even though a Federal Fund Rate hike by the Fed doesn’t directly dictate what happens with mortgage rates, it does have an impact. As a recent article from Fortune says:“The federal funds rate is an interest rate that banks charge other banks when they lend one another money . . . When inflation is running high, the Fed will increase rates to increase the cost of borrowing and slow down the economy. When it’s too low, they’ll lower rates to stimulate the economy and get things moving again.”How All of This Affects You In the simplest sense, when inflation is high, mortgage rates are also high. But, if the Fed succeeds in bringing down inflation, it could ultimately lead to lower mortgage rates, making it more affordable for you to buy a home.This graph helps illustrate that point by showing that when inflation decreases, mortgage rates typically go down, too (see graph below): As the data above shows, inflation (shown in the blue trend line) is slowly coming down and, based on historical trends, mortgage rates (shown in the green trend line) are likely to follow. McBride says this about the future of mortgage rates:“With the backdrop of easing inflation pressures, we should see more consistent declines in mortgage rates as the year progresses, particularly if the economy and labor market slow noticeably.”Bottom LineWhat happens to mortgage rates depends on inflation. If inflation cools down, mortgage rates should go down too. Count on a real estate professional you can trust for expert advice on housing market changes and what they mean for you.

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