Extra Equity - What to do with it
Extra Equity in Your Southern Oregon Home - 5 Things to Do with It.
Full Video Transcript Below
Homeowners! Do You Have An Extra $30k-$100k In Equity_ 5 Things To Do With That Money
Good afternoon, real estate fans, AliceLema here, broker John L. Scott here in Southern Oregon with another edition of our weekly podcast, all things housing in Southern Oregon. So I want to ask the question today. We're going to talk about what if you have $30,000 or a hundred thousand dollars more in your house?
[00:00:17] Since COVID that's the case. In Southern Oregon, most everybody has at least $30,000, maybe as much as $100,000 equity in their house since the shutdown. And so I want to talk about five things you can do with all that money. So the first thing is you could sell that property and have this humongous down payment on a bigger, better property.
[00:00:39] And you still have low interest rate. And so then you end up with a fairly reasonable monthly mortgage payment, and that's really killer because then you get a bigger, better property without all the stress of a bigger mortgage payment, or a much bigger, you know, you can still keep it comfortable and that's just good.
[00:00:57] Solid wealth building without stressing out your finances and jeopardizing your financial future. So I really liked that one. Plus I need more houses to sell. So if you're one of those people call me because let's talk about getting your house on the market. It's still mostly a sellers market. I mean, the market is changing under our feet as we speak, but it's still mostly a sellers market.
[00:01:18] So let's talk about okay, number two is you could use that equity to remove your mortgage insurance. Now how this works is if the property has gone up enough and your lender is happy with that appreciation, they're looking for about a 20% gain.
[00:01:34] Then, especially if it's a conventional mortgage, they'll have an appraiser go out and verify that. And they'll draw the mortgage insurance, right off your payment. That's super cool. Now that's a conventional mortgage. If you have an FHA loan, that mortgage insurance is attached for the life of the loan. That's why a lot of us don't recommend FHA anymore, unless there's other circumstances.
[00:01:57] So I'm not saying it's a bad program. A lot of times you can do better with the conventional. So, but if you're in an FHA, then you actually have to get out, you have to refinance out of that loan and into a conventional, and they will take the mortgage insurance off on that. So you're going to have loan, origination fees and stuff like that.
[00:02:15]And I know some people say you shouldn't refinance unless you have a percentage point different or something like that. And I, I have a different philosophy personally. I refinanced a lot. When I can have a long term benefit. So if I can secure a $200 drop in my payment every month, because I'm going to keep that asset for 30 years, or I'm going to try to pay it off early, or it's going to be a rental, then I absolutely, I'm going to be happy to pay all those refinance fees, but that's just me.
[00:02:48] But I just want to throw that out because a lot of people tell me not to refinance stuff because it's not worth the $5,000. They're crazy. Like really this house was going to be worth X number of dollars, and I'm going to rent it out between now and then. So it makes perfect sense to spend the five grand right now on refinancing.
[00:03:08] Are you kidding? But not everybody agrees with me. So, you know, check it out for your own life. Take it with a grain of salt. That's just my 2 cents. Okay. So that was number two is to remove the mortgage insurance. Number three is to refinance. The property and take some cash out, not to do something frivolous with it.
[00:03:27] We don't want to like be buying jewelry and boats and stuff like that, but use it for buying a rental, use it to help one family member who's a first-time home buyer. You know, maybe help get somebody else started in their real estate career. You could buy a second home. That would be a great thing. You could pay off some debt now, and I don't want to sound like miss judgmental.
[00:03:50]Of course, if you want to buy a boat or jewelry or whatever, You know, that's your prerogative. I'm just saying that's how a lot of people ended up losing their houses during the crash because they refinanced out and they didn't do something good and solid and wealth building for their financial future.
[00:04:07] Okay that's just my 2 cents on that one. Okay. So that was number three.
[00:04:12] Now, number four, one of my favorite things to do is rehab. So you can take the money out and rehab your property, upgrade it. You could do better windows. You could do a new roof, you know, in some of the rehab loan programs, you could take some of that equity and get another mortgage.
[00:04:32] And you could add an apartment. So there are some serious wealth builder, but also maybe your mom or dad needs to live there. You could add another main suite bedroom. So just, if you haven't heard, this is a little tangent, we're not supposed to say master anymore. So we're starting to call it a main bedroom, main suite primary, something like that.
[00:04:53] So. Just, you know, while we're in the transition time of using different words, that's what this means. So how about adding a killer main floor master suite, especially sorry. Oh, I see. Even I don't have it right yet. So added killer main suite especially if you have a two-story right. Well, you could also put in an elevator.
[00:05:13] I know people think that's extravagant, but it's actually not. And it's a way to have a really great resale plus you could stay in the house forever. You could use some of that rehab to make your hallways and your doorways wheelchair wide Walker wide. What about that? You could also add more units because remember in Oregon, if you're in town, you can have up to four units per, per lot.
[00:05:36] Now, if you follow each municipalities rules about that, the state will let you do that. Okay. So that was number four. Use the money to rehab upgrade, ad-on create some more wealth for that property. Last but not least you could do nothing. Number five is do nothing. Just go to bed tonight, knowing that you have all this equity in your house, you made bank just by living in the house that you bought a few years ago.
[00:06:09] So. And I don't mean to be, you know, tongue in cheek about it, but doing nothing is always is always a choice. Okay. So those are our five things you can do with all the money. If you have 30 to a hundred thousand dollars or more equity in your house, since the COVID, which almost everybody does right now, it's just amazing.
[00:06:28] So I'm Alice Lema. I'm a broker here in Southern Oregon with John L. Scott real estate. I'm working all weekend. I want to be the one to sell your house. I want to be the one to help you buy a house. My number is (541) 301-7980. You can text me. You can call me. You can email me. Give us a thumbs up, give us a like subscribe to this channel.
[00:06:50] We want to get the word out. These are all educational videos, but I'm also here to help you with your real estate. So don't be shy. Give me a shout and we'll see what we can do to help you with your next step. In the meantime, have a fabulous weekend. We'll talk to you later. Bye now.