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What Will Homeowners Do With All This Home Equity?

By Dan Green

The National Association of REALTORS┬« reports another big drop in U.S. home inventory; an update on today’s mortgage rates for conventional, FHA, VA, Jumbo, and USDA mortgages; and, an introduction to mortgage rate locks.

Homeowners Have Most Home Equity In History

Home equity. It’s the dollar difference between what you owe on your home, and what your home is worth.

It’s also an illiquid asset which means that, although it’s money that’s yours, it’s money you can’t just spend.

And, right now, according to the most recent Black Knight, Inc. Mortgage Monitor report, U.S. homeowners are sitting on $5.4 trillion dollars of it.

This is the most home equity homeowners have held collectively since ever, and it’s also why you’re hearing so much about the cash-out refinance right now.

A Cash-Out Refinance is a new mortgage to replace your old mortgage, but for a larger amount, with that larger amount going to you in the form of cash to use however you want.

People use cash-out refinances for a all sorts of reasons including:

But, there’s another reason to cash-out refi: diversification.

Homeowners having $5.4 trillion in home equity means that all that cash is locked up in physical property, untouchable by owners, and should those homes ever lose value, that equity goes la bye-bye.

Doing a cash-out refinancing converts that home equity into actual cash, which, although it comes at a cost, can be more safe than having all of your money trapped on paper.

Cash-out refis aren’t for everyone, so if you’re thinking about doing more with your home and its equity, talk to a mortgage lender today.

Click here to get today’s mortgage rates.

Today’s Mortgage Rates

Mortgage rates are headed higher today as markets get prepped ahead of Friday’s jobs report.

If you’re out there shopping for a loan, you’ll find conforming, USDA, jumbo, VA, and FHA mortgage rates up, which leads to higher monthly payments overall.

Note that your particular rate will vary based on where you live, how much you borrow, and the type of home you have. How you pay your closing costs matters, too.

Pay full fees and you’ll get a lower rate. Take your lender’s zero-closing cost option, and your rate will be slightly up.

Rates also vary by lender so talk to two or more of them before choosing a loan that works right for you.

Click to get today’s mortgage rates.

Pending Home Sales Index Climbs Into Spring

On the topic of rising home values, the S&P CoreLogic Case-Shiller Home Price Index was published last week and it showed home values up 6.2 percent nationwide over the last twelve months, with all twenty tracked cities showing improvement.

Gains are just over two percent per year in Chicago and Washington D.C., and range into the double-digits in San Francisco, Las Vegas, and Seattle.

So, what’s an active home buyer to do with data such like this?

The answer is nothing.

Because housing data like this is pretty much useless except to policy makers and economists. Actual buyers of homes don’t care what’s happening nationally, or state-wide, or even across an entire city.

And, that’s because real estate prices are local. You don’t buy a house in an entire metropolitan area. You buy a specific house on a specific street in a specific neighborhood.

Data for individual homes like that can’t be captured in some national housing report issued once monthly by some conglomerate.

Only a human that’s actually in your local market can give you that straight scoop.

Don’t go at it alone and don’t rely on national surveys. Work with an experienced real estate who can help you find good value for your home-buying dollar.

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Written by Dan Green

Dan Green is a mortgage lending expert and the founder of Growella. Prior to Growella, Dan was a six-time, top-producing loan officer; and, ranked repeatedly among the top 1% of loan officers nationwide. Dan's home buying expertise has been in print and on TV with The Wall Street Journal, NPR, Forbes, CNBC, and others.

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