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Housing inventory declines. Here’s what owners should do now.

Among the scarce home inventory, current homeowners may want to use a home equity loan to renovate their existing home.

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Current homeowners looking for a bigger home may have to wait a little longer before moving. That’s because available housing inventory is scarce, according to A new report. Specifically, the number of homes for sale in 2023 fell in 21 of the 50 largest metropolitan areas compared to this period in 2022.

Fewer available houses, higher house price and significantly higher mortgages interest rate combined to drastically reduce the options for potential home buyers. In this environment, options are limited, especially for current homeowners whose mortgage rates are near historic lows. For these owners, it may make less and more sense to move to improve and renovate their current homes.

A major home renovation or repair Making it more comfortable and enjoyable while you wait for market conditions to change can increase your home’s value. Fortunately, there are several ways owners can pay for these improvements

Start exploring your home equity options here now to see how much you qualify for

Why Homeowners Should Use Their Home Equity Now

In today’s market, many homeowners would be better served living and working in their current home for the day they can finally buy something else. Home renovations, esp The correct ones, can dramatically increase the value of your home. There are two ways owners can finance these projects:

Home equity loan

using a Home equity loanOwners can withdraw a lump sum from the equity they have built up in their home

Home equity is calculated By the amount you paid for your mortgage balance combined with the current value of your home. So if you paid off $100,000 of your mortgage and your home went up in value by the same amount, you’d have $200,000 of equity to use. Lenders usually let you borrow 80% to 85% amount that

Home equity loans are generally less interest rate Unlike personal loans and credit cards, however, you have to pay interest on the full loan amount. That said, a home equity loan pays interest duty free When used for IRS-qualified home improvements and repairs, it makes for a cost-effective way to finance these special types of projects.

Explore your home equity loan options here now to see if it makes sense for you.

Home Equity Lines of Credit (HELOCs)

HELOCs work Similar to home equity loans, although there are some differences. Unlike a home equity loan, a HELOC works like a credit card by providing the borrower with a revolving line of credit.

This can be beneficial because borrowers only pay interest on the amount they use – not on the amount they’re approved for (as they do with home equity loans). said, Interest rates on HELOCs Usually variable, so the rate an owner receives after their application is approved may not be the rate they keep in the long run.

HELOCs also benefit from the same interest Tax deductions Home equity loans do. “Home equity loan interest and lines of credit are deductible only when the borrowed funds are used to purchase, construct, or substantially improve the taxpayer’s home that secures the loan.” The IRS Explains “the loan must be secured by the taxpayer’s principal home or second home (qualified residence) and meet other requirements.”

Other options

Home equity loans and HELOCs aren’t currently the only viable options for homeowners to finance major home projects and renovations. reverse mortgage Senior homeowners (age 62 and older), and Cash-out refinancing High interest rates can be a worthwhile option for owners.

With a cash-out refinance, owners take out a new mortgage loan for more than their current loan. They then pay off the first loan with the second and take the difference between the two as cash. If this sounds beneficial to you, start exploring your refinancing options now to learn more.

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