With Property Values Increasing...What Are Your Options?

Orange County - February 2012 Median Home Value $454,000, Today it's $674,000

Time To Sell?
If you purchased a home 5 years ago when the median home value in Orange County was $454,000, CONGRATULATIONS on your timing because the February 2017 median home value is $674,000 according to Zillow. The median sold price in Orange County according to CAR is $745,000. Current inventory is low, and there are buyers who want to purchase a home...your home. If you have outgrown the current property or want to move to a different location, with the increased equity and rates still in the 4's now might be the right time to consider the move. Additionally, the spring and summer months is typically when the most inventory is on the market. If this "selling-season" trend continues, not only can you sell your home for top dollar today with less competition because of lower inventory, but you may have a good amount of inventory from which to choose by the time you close on the sale.

SEARCH HOME PRICES - CLICK HERE

You want to stay...
Property values in Orange County and other surrounding areas have increased year-over-year, and for some that means homeowners may be able to eliminate the mortgage insurance or a 2nd equity line/home loan. Homeowners often chose these loans because their down payment was less than 20% or used FHA financing to obtain the property.

Homeowners with a 2nd/Equity Line should pay special attention to the recent increase in property values because the rate on these loans are variable, meaning it can change at anytime as determined by the FED. The FED raised the Prime Rate for the first time since December 2008 by .25% in December of 2015 and again in 2016 to its current level of 3.75%. Also in December the FED indicated they could raise interest interest rates again in 2017 as many as 3 times. If they continue the trend of .25% increase and raise it 3 times, the Prime Rate could be 4.5% by the end of 2017.

A Home Equity Line Of Credit (HELOC), which has been the prevailing 2nd in the local housing market, has a rate based on the Prime Rate plus a margin. There are several companies customarily used for HELOC's in California and the margins vary from company to company, the loan-to-value, and credit score of the borrower. As a mortgage originator I have seen these margins go as high as 3.90%. If the FED does raise rates by .25% three times during 2017, the total combined rate could be as high as 8.4% for the highest margin equity lines by the end of the year.

Take Advantage Of The Increased Property Values

Eliminate PMI or a HELOC
Property values have certainly increased year-over-year while 30 year mortgage rates have remained relatively steady even though there was a bump up after the election. If the current interest rate is in the low to mid-4's, combining the 2nd or HELOC into a new first mortgage may have a long-term benefit considering the projected increases to the Prime Rate. In the case of FHA borrowers who may have a great rate (in the mid-3's) but pays mortgage insurance (of .85) which may never go away depending on when the loan was originated, combining the loan into a conventional/conforming loan may also have a long-term benefit.

Use Equity To Upgrade Property

FOR SALE - 31331 Summerhill Ct, Coto de Caza

Another noticeable trend is homeowners taking advantage of the increased values to access home equity to pay for upgrades on the home. If a homeowner has long desired an upgraded kitchen, bathroom, or other features which can have a substantial cost, tapping into the equity by refinancing is a popular way to make those upgrades while still increasing the value of the home.

Use Equity To Pay Off Debt
Credit card debt and other expenses such as student loans and medical expenses have an impact on the household cash flow. Households have an average credit card balance of $16,601 according to a NerdWallet report. Some may find that taking out some equity in the home and locking in a long-term low interest rate will enable homeowners to pay off debt while simultaneously lowering the household monthly payment obligations.

There is no cost to run the numbers and explore options which may include speaking with a local real estate agent. At my employer we will run the comparable sales in your neighborhood to determine a reasonable value range and compare it to what is owed on the home. If your goal is to stay in the property, you will be provided estimated figures to determine if a refinance is right for you. Should you explore the option of selling, we can refer some great agents in your area that can provide a more detailed report (CMA - Competitive Market Analysis) to help you decide if selling now is the best option. 

Contact me today and allow me and the people in my sphere help you obtain your goals.

Todd Burns
949-547-3557
tburns@jmj.me
MLO - JMJ Financial Group
NMLS 254981