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The Dynamics of Home Equity

27 Jul

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For many people, their home is their largest asset and their best performing investment. The equity in a home is the difference in what it is worth and what is owed. Two dynamics, appreciation and unpaid balance, work in concert to make homeowner’s equity grow.

It can be said that you appreciate the fact that your home is your best financial investment. It is also ironic that the appreciation, the increase in value, is what causes it to be your best financial investment.

In a one-year period, the increase in value divided by the beginning value will determine the rate of appreciation for the year. News stories and articles, frequently, report statistics on appreciation for the month, the year or longer. In many cases, a national appreciation is mentioned but the local appreciation is more reflective of an individual property.

The National Association of REALTORS® reports “The median existing-home price2 for all housing types in June was $363,300, up 23.4% from June 2020 ($294,400), as every region recorded price jumps. This marks 112 straight months of year-over-year gains.”

The low inventory being experienced nationwide has caused some significant appreciation that has increased homeowners’ equity. According to Black Knight, a mortgage technology and research firm, at the end of 2020, roughly 46 million homeowners held a total of $7.3 trillion in equity.

If a homeowner has a mortgage on their home, while the home is appreciating, the unpaid balance is declining. An increasing portion of each payment is applied, when the payment is made, to the principal balance to retire the debt based on the term of the loan.

Each month the equity in the home becomes larger because the home is worth more due to appreciation and the unpaid balance is less due to amortization.

Once a homeowner has sufficient equity in their home, they can borrow against it and take cash out of their home. Most lenders require that the homeowner maintain at least 20% equity position. This means that owners can borrow up to 80% of the appraised value less the amount that is currently owed on the property.

The options include a cash-out refinance mortgage or a home equity line of credit, HELOC. While some institutions have stopped offering HELOCs, they are still available.

The HELOC is a line of credit that is established for usually ten years. The owner is approved, and the money is available to draw out as needed. The interest is calculated daily. Like a credit card, when the balance is paid down, the unused portion of the available credit is available again.

Your real estate agent may be able to offer some lender suggestions.

6812 Wild Ridge Court, Plano

25 Jul

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IMPRESSIVE CUSTOM HOME ON NEARLY HALF ACRE LOT!

5 Bedrooms / 5.5 Baths / Game / Media / Pool & Spa
5524 sq ft / Built 2000 / Lewisville Schools / 0.466 Acre Lot

CLICK HERE TO VIEW HD TOUR

Upgraded stone borders and brick elevation highlight the gorgeous elevation of this home along with a covered porch with cast-stone railing. As your guests walk through the stately double doors, they will be greeted by a stunning entry with rich nail-down hardwood floors, custom mill work and columns. Enjoy private dinners in the elegant formal dining room with French doors that open to the covered patio area. A double mantle fireplace with exquisite woodwork and corbels, 23 foot ceilings and a beautiful pool view highlight the formal living area. The kitchen that opens to the family room and breakfast area is a gourmet chef’s dream with a Thermador 5 burner gas cooktop, stainless Thermador double oven, KitchenAid dishwasher, rich granite counters in an excellent work area and includes a large furniture-style serving island with chandelier. It will be easy to stock the large walk-in pantry and abundant, beautiful cabinets with crown and dentil moldings. There is more storage space in the adjacent butler’s pantry that boasts glass front cabinetry. The Texas sized family room is the perfect spot to relax or entertain and is highlighted by a luxurious cast stone fireplace with gas logs, nail down hardwood floors, extensive and upgraded millwork and built-in shelving with designer touches and media storage. Enjoy the beautiful and panoramic views of the backyard and pool area that can be accessed through the sliding glass doors.

The private and split owner’s retreat boasts upgraded door casings, millwork, boxed ceiling, plantation shutters and doors to the pool area. The stunning luxury spa bathroom has separate vanities with custom mirrors, beautiful travertine flooring, and an oversized shower and jetted bathtub. In addition there is convenient storage in the linen closet and step-down closet with added shelving. Guests will enjoy their stay in the convenient downstairs suite that boasts a beautiful en-suite bath and door to a private patio. The remodeled powder room has a furniture style vanity, trendy backsplash ad upgraded fixtures. Upstairs you will find 3 additional bedrooms, each with their own special features. One of the
spacious bedrooms has a large walk-in closet and a remodeled bath with a frameless shower enclosure. A second bathroom has a walk-in closet, ceiling fan, remodeled bath and the third has a boxed ceiling, a rustic-style remodeled bath and a large walk-in closet. Upstairs is a landing area for study or play in a private executive study with extensive woodwork to include plantation shutters, picture frame molding and wainscoting, French doors and a coffered ceiling, a media room that is excellent for entertaining and adorned with Corinthian columns with lighting, wired for sound and projector as well as an excellent storage closet. More fun waits in the game room with boxed ceiling, two storage closets, a mini-kitchen area with sink, microwave and cabinets.

The large private backyard with grassy area and nice trees provide your very own retreat and oasis. Enjoy the resort-style pool with fountains, spa and lounge area. Other outstanding features are a custom flagstone fireplace area, an expansive stamped concrete deck area and a utility room with sink, 42” cabinets, additional storage, room for fridge and a hanging rack. This home leaves nothing to be desired and is in the much desired community of Kings Ridge. This home is move-in ready and after one look you will want to make it your own!

Please contact Jeff Jacobs at 972.978.6539 for more information or click HERE.

For more information and other homes for sale in this area, check out www.myrealtytown.com 

982 Crystal Lake, Frisco

23 Jul

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9400 Braxton Lane, Plano

20 Jul

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RARE & IMMACULATE ONE-STORY IN SOUGHT-AFTER RUSSELL PARK IN FISD

4 Bedrooms / 3 Baths / Study / Corner Lot
2,803 sq ft / Built 1999 / Frisco Schools

CLICK HERE TO VIEW HD TOUR

This gorgeous and rare one-story Highland home in Stonebridge Ranch has a beautiful
upgraded kitchen  and is close to wonderful neighborhood amenities in sought-after Falcon Creek. The elevation of the home is enhanced by stone landscape borders and a front yard exquisitely and professionally landscaped to include upgraded exterior lighting. Upon entry you will be greeted by natural bamboo hardwood floors throughout most of the home and plantation shutters in the front area. Relax or entertain in the generously-sized family room with a backyard view that opens to the kitchen and boasts a gas fireplace with gas logs and sleek black tile. Owner’s choice for the second living area that would be perfect for a formal dining room, office or playroom for children. Any chef would enjoy cooking in the updated kitchen that has rich quartz counter tops, a serving island with additional storage, pendant lighting above, stainless appliances, to include GE double ovens, a GE microwave and Asko dishwasher. And there is abundant room to store your kitchenware in the painted cabinets with pulls. The sunny breakfast area with a patio view is a perfect location for that morning coffee and just adjacent built-in custom cabinets for additional storage and a beautiful French door lead to the backyard patio.

Plush neutral carpeting is another upgrade and was recently installed in the all the bedrooms (July, 2021). The split and private Owner’s Suite retreat has a magnificent backyard view, nice bath with a garden tub, separate shower with upgraded enclosure, dual sinks and upgraded lighting and faucets. And there is generous space to store all your belongings in the  walk-in closet. In addition, both secondary bedrooms have ceiling fans and are served by a full bath.

The large, relaxing covered patio with skylights and a ceiling fan is the highlight of the lush and extensively landscaped backyard with a stone walkway to the side yard. Other great amenities to this home are a utility room with gas connections, Falcon Creek Park within walking distance for picnicking, fishing, and a barrier free playground for the children. Stonebridge Ranch is a sought after community that has something for everyone, with its lakes, ponds, beach area and parks and playgrounds. Don’t hesitate to see this lovingly cared for home which is just waiting for you to make it your own! It is priced to sell and move-in ready!

Please contact Jeff Jacobs at 972.978.6539 for more information or click HERE.

For more information and other homes for sale in this area, check out www.myrealtytown.com 

Doing Nothing is Costing Something

20 Jul

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It has been said that more money has been lost due to indecisions than ever was due to making the wrong decisions. Many times, the larger the decision, the more likely procrastination comes into play and doing nothing will cost something.

Buying a home is certainly one of the biggest decisions people make. Careful consideration and planning are necessary steps leading to a prudent decision. Considering today’s market that includes a global pandemic, financial volatility, and rapidly rising home prices, it is understandable that many people thinking about a home purchase are in a wait and see posture.

However, there is a cost connected to waiting and it may be a lot more than you think. The recent Home Price Expectation Survey 2021 Quarter two estimated appreciation rates will average just under 5% annual for the next five years. It expects prices to increase by 8% in the next one year.

Being a renter or even putting off moving to a larger home, could keep you from enjoying the benefit of that appreciation. If your down payment is in the bank, your expected earning will be less than 2%. In a home, the owner has the benefit of leverage when a mortgage is used to finance the home.

Buyers are borrowing a large portion of the purchase price at around 3% interest but the entire value of the home is appreciating at a higher rate and the profit builds equity for the homeowner.

Another major component for the owner is that the amortizing mortgage is being reduced with each payment that is made. As the home goes up in value due to appreciation, the unpaid balance goes down with principal reduction creating equity from two directions.

If you waited one year to buy a $350,000 home today, the price could easily be $378,000. A 5% down payment on this home at today’s price is $17,500. If you could earn 2% on a certificate of deposit, it would be worth $17,850 in one year. If it used as a down payment on a $350,000 home that appreciates at 8%, the equity in one year would be $52,442. Use the Your Best Investment calculator to make your own projection.

Mortgage experts anticipate rates to rise by 0.75% in the next year which means that you’ll pay more interest on a larger mortgage by waiting. The monthly payment could easily be $200 more by waiting a year. Based on how long you intend to be in the home, it could make the overall housing cost much more.

To run some examples of projections based on your own expectations and at the price you are considering, go to Cost of Waiting to Buy and Rent vs. Own.

If you have some specific concerns that is keeping you from deciding today, let’s get together on the phone, an online meeting or somewhere face-to-face so that you can get the facts about what it takes to buy a home now.

1500 Crescent Valley Drive, Prosper

15 Jul

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111 Peregrine Drive, McKinney

13 Jul

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Updated Highland One-Story In Stonebridge Ranch!

3 Bedrooms / 2 Baths / Updated
1981 sq ft / Built 1995 / McKinney Schools

CLICK HERE TO VIEW HD TOUR

This gorgeous and rare one-story Highland home in Stonebridge Ranch has a beautiful
upgraded kitchen  and is close to wonderful neighborhood amenities in sought-after Falcon Creek. The elevation of the home is enhanced by stone landscape borders and a front yard exquisitely and professionally landscaped to include upgraded exterior lighting. Upon entry you will be greeted by natural bamboo hardwood floors throughout most of the home and plantation shutters in the front area. Relax or entertain in the generously-sized family room with a backyard view that opens to the kitchen and boasts a gas fireplace with gas logs and sleek black tile. Owner’s choice for the second living area that would be perfect for a formal dining room, office or playroom for children. Any chef would enjoy cooking in the updated kitchen that has rich quartz counter tops, a serving island with additional storage, pendant lighting above, stainless appliances, to include GE double ovens, a GE microwave and Asko dishwasher. And there is abundant room to store your kitchenware in the painted cabinets with pulls. The sunny breakfast area with a patio view is a perfect location for that morning coffee and just adjacent built-in custom cabinets for additional storage and a beautiful French door lead to the backyard patio.

Plush neutral carpeting is another upgrade and was recently installed in the all the bedrooms (July, 2021). The split and private Owner’s Suite retreat has a magnificent backyard view, nice bath with a garden tub, separate shower with upgraded enclosure, dual sinks and upgraded lighting and faucets. And there is generous space to store all your belongings in the  walk-in closet. In addition, both secondary bedrooms have ceiling fans and are served by a full bath.

The large, relaxing covered patio with skylights and a ceiling fan is the highlight of the lush and extensively landscaped backyard with a stone walkway to the side yard. Other great amenities to this home are a utility room with gas connections, Falcon Creek Park within walking distance for picnicking, fishing, and a barrier free playground for the children. Stonebridge Ranch is a sought after community that has something for everyone, with its lakes, ponds, beach area and parks and playgrounds. Don’t hesitate to see this lovingly cared for home which is just waiting for you to make it your own! It is priced to sell and move-in ready!

Please contact Jeff Jacobs at 972.978.6539 for more information or click HERE.

For more information and other homes for sale in this area, check out www.myrealtytown.com 

4924 Viejo Court, De Cordova

13 Jul

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Property Inheritance

13 Jul

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Stepped-up basis is an incredible benefit to people who inherit property. Not only do they receive the property itself, the basis or cost value of the property becomes the fair market value at the time of the decedent’s death. This avoids recognizing the gain between the decedent’s cost and what it is worth when it is inherited.

If a person had purchased a home for $100,000 and 20-years later when they died, it was worth $500,000, there would be a potential gain in the property of $400,000. However, because of a tax provision called step-up tax basis, the person inheriting the property will have a basis of the fair market value at the time of death.

The recipient could sell the property for $500,000 and have no taxable gain on the sale.

A formal appraisal is the most reliable and defensible estimate of fair market value at the time of the decedent’s death. There will be a fee of several hundred dollars for the appraisal. Another alternative is to get a broker’s opinion of value in writing. It may be reasonable to get three opinions to see if they are similar. They should rely on comparable sales to justify their position. Either method is acceptable to IRS.

There is discussion from the current President about the possibility of eliminating the step-up in basis that allows families to leave assets to their heirs without having to pay capital gains tax. Some people consider it to be a tax loophole for the ultra-rich but it can impact ordinary people who inherit property and do not want to have to sell it.

An example would be a family farm that when inherited by the heirs may not be able to afford to pay the capital gains tax due at time of transfer and they could be forced to sell the property or borrow the money to pay the tax, assuming that was possible.

Federal estate tax is paid from the deceased’s remaining estate, not by the heir. If the decedent’s estate is approaching the limit before estate taxes are due, currently $11.7 million, professional tax advice should be considered because there could be additional provisions in play. More information on this can be found on IRS.gov.

901 Grapevine Court, Prosper

9 Jul

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