"I want to take advantage of this seller's market, but I don't want to move!"
The market in northern Colorado is certainly in a strong position. Most homeowners who purchased in the last few years or before are sitting on really solid gains in the market value of their homes and they are worth much more than what they owe. Some will choose to take advantage of this and sell their property. But what do you do if you plan to stay in your home or keep your property, but wish to capitalize on historically low interest rates and strong property values? Here are a few options on what some of my clients have chosen to do:
Refinance or take out a line of credit on the home and use that to purchase an income-generating property/rental
Refinance or take out a line of credit on the home to do a remodel/large repairs
Refinance to lower monthly payments or remove private mortgage insurance
Refinance to a 15 or 20 year mortgage instead of a 30 year
Here’s a hypothetical, let’s say you owe $150,000 on your home and your home is worth $300,000. Some banks and lenders will give you a home equity line of credit up to 80% of the value of the home (a full refinance could likely go higher). In this case, that would be up to $240,000 (minus what you owe on the home). So in this scenario, you’d be able to access $90,000 to use toward the down payment on a rental property. Lenders will typically require a 20-25% down payment on a rental property so at 20% down, you’d essentially have a down payment for a $450,000 home. Nice, huh? Or you could keep your current home as a rental after accessing the equity and then purchase another, nicer home that fits your needs better.
There are a number of ways to do this and if you need a recommendation for a good lender, I’d be happy to provide the names and numbers of folks I know and trust. Just because you have decided to stay in your home, doesn’t mean you can’t take advantage of the ideal market conditions happening right now. Please give me a call if you would ever like to chat through some of these ideas further.