Knowing your home’s value can affect you as a homeowner in many ways. Normally people wait to find out their home’s value till they’re putting their home up for sale. That’s a common reason, but it’s not the only one.
There are other reasons you should include your home’s current market value in financial planning. Knowing and tracking this number is important. Why? It allows you to make the most informed decisions about your spending and your financial health as a homeowner.
Your home will need repairs and updates.
It happens to every home at some point. The financial wealth you have from your home’s value allows you freedom with these repairs and updates.
You want to understand where your home’s value. It will give you a good basis for determining what you want to do with it. You want to make sure that any improvements strike a balance. home comfortable to live in, but will also potentially increase the value of your property.
It’s a good idea to prioritize projects that will enhance your home’s value, such as a kitchen or bathroom remodel, to ensure that the renovation costs will pay off. Also, you want to make sure that your upgrades match the other homes or “comps” in your neighborhood if a return on investment is important to you.
Should you refinance?
These last few years have seen historic lows in mortgage rates. You may have had your mortgage broker reach out to you saying you should refinance. Sometimes programs are out there that will save you money.
Depending on the loan program, lenders would allow you to borrow a maximum of 75% to 96.5% against your property. While you need to qualify on other credit parameters, equity in the house is one of the more important underwriting criteria. Up to a certain point, the more equity you have the better loan terms you would qualify for. Also, knowing your home value tells you how big a mortgage you can take – whether its refinancing to get a better rate, lower payment or taking a cash-out to satisfy other needs. A bank appraiser will come out to appraise your home during this process.
Refinancing leads to our next reason.
Do you want a line of credit?
When you know the value of your home, you’ll see how much equity you’ve built up. And when you reach the point where the value of your home is more than what you owe in mortgage, you may be able to take out a Home Equity Line of Credit or HELOC. This loan uses that equity as a collateral and can be repaid on a fixed interest rate. You can use this fund to give you more financial flexibility, such as to get financing to start home improvements that will add value to your home, or even invest in a second property.
Likewise, if you’re thinking of refinancing so you can capitalize on today’s low mortgage rates, the more equity you have in your home, the better is your chance to qualify for a more desirable loan term, provided that you also qualify for other credit considerations.
Will you relocate for your job?
These last few years we’ve some very big shifts in the job markets. We’ve seen companies opening new headquarters all around the world.
Companies relocations programs differ vastly from company to company. This is why it’s so important for you to know your home’s value in the current market. You’ll be better equipped to make decisions should the subject ever arise.
Is homeowner’s insurance current with your home’s value?
When you closed on your home, you insurance policy reflected that sales price. Then you were covered at least for what you paid for your property.
But after a few years of paying your mortgage and doing some upgrades, your home has likely increased in value.
In this case, it’s important to have your home’s value analyzed in today’s market.
Then it might be time to reevaluate your homeowners insurance policy. You can set up a meeting with your insurance company for a refresher on your coverage policy. Knowing your home’s value will make sure you’re covered for the cost of its full value if something were to happen.
How to find your home’s value.
Keeping yourself abreast of your home value is a great idea. Situations and plans can change in future, sometime involuntarily. So being in-the-know about the home value will help you take the next steps when you are ready or when life throws a curve ball.