While gathering the data for our latest Real Estate Market Update for the Sacramento Tri-Valley area. We found some fantastic news about our local real estate trends. In the Sacramento Market, Home Values are UP. With this positive news came a realization that homeowners have begun experiencing something familiar but not seen for quite a while, Equity. One great benefit of home ownership, Equity is the difference between your home’s value and the amount owed. As values increase and homeowners pay down their mortgages, real estate equity positions continue to rise. This ownership stake ultimately results in long-term personal wealth, which drives the economy.

So, you’ve got equity. Now what can you do?

1. Home Improvements: When the market was down, many homeowners held off from fixing up their homes due to uncertainty of whether it would be worth it or not. With home prices increasing, many homeowners are opting to improving their homes rather than moving. Whether renovating the kitchen, completing deferred maintenance or adding a much needed room, a cash out refinance can provide the money needed to complete the work. The great news is that while this improvement creates a much nicer lifestyle, if done strategically it may significantly increase the value of your home as well.

2. Investing: With the Real Estate market continuing to improve, rents are going up as well. Many homeowners are eager to purchase rental property for all the benefits that it provides. In order to get the money for the down payment, taking cash out of your home can be an effective way to get the down payment together. Others are deciding to keep their existing homes, turning them into rentals and purchasing their long-term dream home. Equity can make this all possible, while providing a tax benefit and increasing cash-flow.

3. Debt Planning: If you have high interest debt such as student loans, car payments, tax liens, or credit cards, rolling them into the home loan can be a great advantage. While the monthly mortgage payment might go up a bit, it can be far off-set by eliminating unsecured debt. It is not uncommon to decrease your payments by $500 to $1,000 per month while getting a better tax write-off.

4. College Education: Many parents are in a quandary about how they are going to pay for high-priced college tuition and expenses. If you’ve been thinking about taking on a student loan, or a second mortgage, consider refinancing your primary mortgage instead. The rates are typically much better, you can take a Schedule A deduction on your taxes, and the payment is not typically as high. Payments can be spread over a longer period of time, which reduces the stress. This is a great time of life with the kids, you might as well enjoy it while you can.

We hope you’ve found these ideas of value. We’ve included some useful resources below in order to answer more of your questions. Please call or email us if we can help you evaluate your current situation.

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