There are many people who are thinking about refinancing their homes. For example, some people may be interested in reducing their monthly payments, while other people may be interested in tapping into the value of the home to fund a home improvement project. What is the relationship between property values and refinancing? There are several important points to keep in mind.
Property Values Tend To Rise
First, it is important for homeowners to understand that property values tend to rise during the life of a mortgage. For example, someone may purchase a home valued at $250,000. Then, fifteen years later, the home might be valued at $350,000. This might mean that homeowners have access to an extra $100,000 in equity. They might use some of this money to put towards a new home when they sell their current home. Or, they might refinance their home and access that equity to complete a home improvement project.
Monthly Payments Might Go Up
If homeowners decide to refinance their houses and take all of the equity out of the home, they might be starting their 30-year mortgage over again. Then, because the property is worth more money, they may end up with a higher monthly payment. That is why homeowners need to work with a professional who can help them figure out how the refinancing process may impact their finances in the future.
Why Property Values May Rise
There are several reasons why property values may go up. First, there might not be enough homes in the local area. Therefore, the ones that are available might be worth more money. The popularity of a specific location might increase as well. There might be a new company moving to the area with attractive job opportunities. Finally, home improvements might also increase the value of the property.
Why Refinancing Might Make Sense
There are several reasons why it might be a good idea to refinance a home. First, homeowners might use some of the equity to pay off existing debt, such as medical bills. Some homeowners like to refinance their homes to reduce their monthly payments with a lower interest rate. Finally, there are homeowners who refinance to complete home renovation projects.
Last week’s economic reporting included readings on sales of new and previously-owned homes, inflation, and weekly readings on mortgage rates and jobless claims. President Biden announced his nomination of Federal Reserve chairman Jerome Powell for a second term. Financial markets were closed Thursday and Friday for the Thanksgiving holiday.
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