Home prices rose 16.6% in May, hitting a new record high in price gains, according to the latest S&P CoreLogic Case-Shiller Home Price Index. That’s up from the already record-breaking 14.6% gain for single-family homes recorded in April.
The S&P index noted that the increases were most pronounced in metro areas like Phoenix, San Diego and Seattle, where median home prices surged over 23%.
"A month ago, I described April’s performance as ‘truly extraordinary,’ and this month I find myself running out of superlatives," said Craig Lazzara, S&P Dow Jones Indices managing director and global head of index investment strategy. "The 16.6% gain is the highest reading in more than 30 years of S&P CoreLogic Case-Shiller data."
Keep reading to learn how you can cash in on these median home value gains through a mortgage refinance or by way of your home's equity. If you’re thinking of refinancing, consider using Credible. You can use Credible's free online tool to easily compare multiple lenders and see prequalified rates in as little as three minutes.
Amid the rising cost of buying a home in the United States, homeowners have several options at their disposal to capitalize on their newly gained home equity. They include:
- A cash-out refinance
- Refinancing without taking out cash
- Letting home equity build
Cash-out refinance: Most lenders won’t perform a cash-out refinance unless the homeowner has more than a 20% equity stake in their home, meaning they can’t owe more than 80% of its total value. A homeowners’ equity stake can increase either by making their monthly payments, or through an increase in the home’s value.
Cash-out refinancing can allow homeowners to use the equity they've built up as cash to fund expenses like home improvement projects or paying off debt.
With surging home prices, many homeowners – and even some who have bought their home as recently as this past year – have seen a significant increase in their home’s value and are now in the market for a cash-out refinance. If you are interested in seeing how much equity you could take out of your home, visit Credible to compare multiple lenders at once.
Refinance without taking out cash: There are multiple reasons homeowners may want to take out a mortgage refinance, and a cash-out refinance isn’t the only option. For example, homeowners that own less than 20% of their home’s value have to pay mortgage insurance.
For conventional loans, they can stop their insurance payments once they reach the 20% equity mark. But for other loan types like FHA loans, the only way out of this insurance is through a refinance. With record price gains over the past few months, many homeowners can now save hundreds on their monthly payment by refinancing out of their mortgage insurance requirement.
And this is in addition to the hundreds that could be saved from refinancing into low interest rate. The latest Freddie Mac report shows the average interest rate for a 30-year fixed-rate mortgage dropped to 2.78%. Visit Credible to compare multiple interest rates at once and get prequalified without affecting your credit score.
Let equity continue to build: Homeowners are seeing significant gains in the value of their homes, but choosing to sell now might not be the best move since they would then enter the highly competitive housing market as potential buyers. While home price growth is expected to moderate toward the end of the year and headed into 2022, sale prices will continue to increase.
Homeowners who choose to remain in their dwelling a little longer, though, will continue to see their equity grow. They can have the opportunity to sell at an even higher profit later, but will have less competition and more housing affordability when they purchase their home.
When you are ready to sell your home and buy a new one, it’s a good idea to shop around at multiple lenders to ensure you are getting the best rate. Use an online marketplace like Credible to view multiple mortgage lenders at once.
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