Seven Things to Do If Your Home’s Value Suddenly Changes
When the value of your home goes up, you have more equity, which is a good thing. When it sinks, you have less equity—and that could be a sign that the housing market and the overall economy are headed toward choppy waters, which is bad. Both of these scenarios assume that the value of the home will constantly change over time, but what happens if the value of your home drops or rises sharply and suddenly?
Now the value of real estate is quite high and has been growing steadily over the years. But as anyone who was alive in 2008 can tell you, home prices can plummet overnight. If the value of your home rises or falls very quickly, there are several steps you should take to protect your investment and your property.
What to do if the value of your property has risen sharply
If you wake up one morning and find that the value of your home has jumped, you will automatically receive a huge benefit: more equity. You literally own more of your home than you did just recently, simply because the ratio between what you owe on your mortgage and what you could get if you sold the place is greater.
But don’t just settle for victory—there’s something else you can do to really take advantage of the situation:
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Request a home appraisal. When you took out a loan to buy a home, everything was based on the appraised value of the place. If the home is now worth significantly more, you have the option of eliminating private mortgage insurance (PMI) if you have it, or refinancing at a better rate (if rates are actually lower than when you originally took out the mortgage). loan). To do any of these things, you’ll need to have the site appraised to officially increase the value – not a self-appraisal , but a payment for an actual appraisal. This relatively small cost can be worth it if you save thousands (or more) in PMI and interest.
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Consider selling. A home isn’t just an investment, it’s where you live, but people sell their homes on average every eight years or so, so if your home is suddenly worth a lot more, it’s worth asking yourself if the time is right. In the end, selling your home could net you a nice payout by liquidating all that equity.
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Consider a HELOC. A home equity line of credit (HELOC) is a loan issued against the equity of your home, so waking up with more of that equity gives you a larger HELOC to work with. You can use that HELOC money to make home improvements at a relatively low cost in terms of interest, which can lead to an even higher home value and even more equity, so this could be a great opportunity to renovate, renovate, and freshen up your home. property.
What to do if the value of your property has dropped sharply
The opposite scenario is that you wake up one day to find that your house is worth significantly less than it was yesterday. However, now is not the time to panic—it’s time to consider some smart steps that can protect your finances and your home:
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File an appeal of your property tax assessment. Your local government assesses the value of your home to determine the amount of taxes you must pay on the property. If your property was last assessed when its value was at its peak, it may be worth filing an appeal to lower your assessment and therefore your tax bill. The procedure will vary depending on where you live, but it can mean significant savings.
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Contact your insurance. Another reason to get a new appraisal on your home is your homeowner’s insurance, which is based in part on the value of your home and the estimated costs of restoration. If this value has dropped, you may be able to reduce the amount of your coverage and therefore the premiums you pay for that coverage.
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Prepare for HELOC changes. If you already have a line of credit against your home, it is based on the old appraisal of your home. If your lender notices that your home is now worth significantly less, they may freeze or reduce your HELOC. You will still have to repay whatever you borrowed from the HELOC, but you may lose access to the remaining funds. It may make sense to take some money out of your HELOC if you know you’ll need it soon.
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Consider refinancing. If changes in the value of your home have brought you into negative equity territory (meaning you owe more on your mortgage than the home is currently worth), you may want to consider refinancing to balance things out. This may not be easy depending on current interest rates and your lender’s willingness to work things out, but it’s worth thinking about the moment you notice a sudden change in the value of your home – and it’s definitely worth calling your lender to find out what makes sense.