As you probably know, the value of American homes has increased over 15% in 2021. The historic price increases the housing marketing experienced had a major impact on homeowners’ equity. If you are a homeowner with a mortgage, the amount of equity in your home likely increased 31% last year. What does this mean for you as a homeowner? One of the biggest benefits you can take from home equity growth is eliminating your PMI payment. Private mortgage insurance, or PMI for short, is insurance lenders require if you have a mortgage amount over 80% of the value of your home. This insurance will pay the lender if the borrower defaults on their mortgage. The good news is that, if you have a monthly PMI payment, you can have your home reappraised. If the value of your home has increased so that the mortgage balance is now less than 80% of your home’s worth, you can have PMI eliminated.
The other major benefit of home equity increases is the resulting wealth that comes with it. Homes are most Americans' largest purchase and most valuable asset, and as the value of their home increases, so does their equity in it and overall personal wealth. The equity can be taken out for other purposes through a cash-out refinance or a home equity line of credit. Either option provides a financial safety net for homeowners.
If you have any questions about how to go about eliminating your PMI payment or how to use your home’s equity to help you achieve your financial goals, please don’t hesitate to reach out to me and my team. We are here to help.