For most homeowners in Texas, your home has most likely been your best investment, especially if you bought 3 or more years ago. If you purchased pre-2012, you might have doubled or more the equity in your home. Equity is the key word. Your equity is what your homes worth today minus what your payoff to the lender is. To be fair to yourself, you may want to subtract what repairs or updates you need to complete, to realize the full market value.
We have been coming across more and more folks whose circumstances in life have changed. Maybe their job situation changed, or they feel like they don’t need that large of a house, or they just don’t want the larger payment, but they don’t feel like they really want to sell.
Well, you have options.
Rate and Term Refinance
This might be an option if your cash flow has dropped and your property taxes have gone up. A rate and term refi is just taking that current loan balance and refinancing it out to a longer term, and spreading that lower loan balance out to a longer term. I am sure that most conventional wisdom financial advisors will say this is a horrible idea, but there is a time and place for everything. Plus, there is nothing saying you can’t make additional payments towards the principle of the loan at any time.
You can ask us for a good mortgage broker to give you a quote or you can use our mortgage calculator below and it can tell you what your new payment will be. Don’t forget to add back in your taxes, insurance, and HOA fees.
A home equity line of credit or HELOC, is usually a second loan you take on part of the equity of your house. This turns the equity of your home into a line of credit that you can access anytime. The key term is CAN access, but don’t have too. An example of how this works. Go to your bank or credit union and get a $50,000 line of credit on your home. You can leave the money with the bank and not pay any interest at all. When you need it, go to the bank and pull out what you need, for example $10,000. Now you pay interest on that $10,000 until you pay it back. Once you have paid it back, you still have the $50,000 you can access. It does not go away once it’s paid off.
The one downside to this is the interest rates are usually adjustable rates, so your interest rates will probably go up. I have had a HELOC for years through my Credit Union. It was very easy to obtain and was very low cost, around $300. I have used it in the past for home repairs and even investments in other real estate.
Another great option if you would like to downsize but keep the current home, is to rent it out. With all the people moving into Texas, the rental market is in high demand. In fact, many cities in Texas are 50% or more rental properties. Austin is 52% renters.
Renting has a lot of upsides.
- Someone else is making your payment and in many cases, you make a little bit more.
- There are tax benefits, as well. Some of those might go away with the new tax bill of 2017, especially if you don’t itemize your taxes, but it’s worth checking into.
- Combine it with a payment lowering rate and term refi. and make even more each month.
Sure, the downside is that you are now a landlord. But, it really is not as bad as it sounds and you can always hire someone to manage the potential headaches for you. We might be able to help, click here to contact us.
We are real estate brokers and don’t make a dime off any of the mortgage options listed even if we refer you to a loan officer. If you are interested in talking with someone, we would be happy to happy to hook you up.
We also would be happy to help you find out how much equity you really have in your home. Click here and we will give you a free market analysis. If you might be interested in keeping your current home and buying another, we can help with that as well.