Mortgage rates continued to climb from March to April this year after a mostly downward trend during the pandemic. The 30-year fixed-rate and the 15-year fixed-rate reached their lowest points on January 7, but both began to climb after that. Forbes Advisor still considers current mortgage rates low and advises people to take this opportunity to get a new home loan or refinance their mortgage.
Because of the low mortgage rates, the number of home buyers increased. The number of available homes in the market did not keep up, hence home prices also increased.
The situation means that homeowners now have higher home equity. Data shows that in 2020 homeowners gained $1.5 trillion in total. If you are a homeowner, there are various ways you can profit from the current scenario.
Refinance Your Home
At the very least, you can refinance your home loan to get a lower monthly payment and be more liquid. Having extra cash monthly can come in handy for emergency expenses during the pandemic.
You can cash out from your equity to unify all your outstanding debts, such as an auto loan, any remaining student loans, and your credit card debts. Interest payments on all of these are much higher than mortgage rates, hence, you save money by canceling them and just paying a higher mortgage.
You can cash out from your equity to start a home-based business. Make sure you have a sound business plan, and that your enterprise will not just wipe out your capital. If you succeed, you can even pay up your mortgage sooner. In whatever way you decide to use your refinancing, make sure to research the best mortgage rates you can get. Also, make sure that you have a high credit score, such as 740 or higher, to qualify and get the lowest rate.
Rent out Your Home
A more reliable business plan is to rent out your house. Because of the limited supply of houses for sale, the single-family rental market is now booming. You will not have any difficulty in finding tenants for your house. The rent you will get from your house can go toward paying your mortgage.
But where will you live? This is where you can use the money from your cash out. You can build an accessory dwelling unit (ADU) right beside your current house and move into it. ADUs are very affordable, and you will have the luxury of living in a brand-new unit. In this scenario, you get to keep your main house and its value will continue to appreciate.
Sell and Buy Small
If you think that you can downsize your lifestyle and live in a smaller home, you can consider selling your house outright and buying a smaller one. This is the best solution if you lost your job or if you had to accept a pay cut. You can do away with your mortgage completely by joining the tiny house trend. Instead of competing with other buyers in the housing market, you can purchase a small lot in an affordable locality and have your own house built.
It does not have to be a cramped space. You can determine the size that fits you and your budget. Make sure that you have enough left over as a comfortable financial safety net. Make sure you check first with local authorities regarding laws covering the construction of small houses. Different locales have different rules about this.
You can sell those of your belongings that will not fit into your streamlined new house and lifestyle. You can use what you earn from these to buy appropriate furnishings for your smaller residence.
You can also run a home-based business that does not need much capital from your small house. All you need is a computer and a strong, reliable Internet connection to do drop-shipping, for instance. This means selling goods online for other people and getting a commission for every sale. Your supplier holds the inventory and does the shipping so all you need to do is online marketing on free social media.
Living in a Gold Mine
If you are a homeowner, you are now living in a goldmine. Your house is much more valuable today than when you bought it.
There is a window of time when you can maximize your profit from this treasure trove, and it is slowly closing as mortgage rates are continuing to climb inch by inch. Take advantage of this opportunity while you can. Decide how you can best earn from current mortgage rates and act now.