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    Home equity can make you rich: Here's how

    Building home equity is important, why finding a home with the potential to become equity rich is also important. Learn how to increase home equity here.

    Home equity can make you rich: Here’s how

    Erik J. Martin

    The Mortgage Reports Contributor

    November 26, 2018 - 4 min read

    In this article:

    More homeowners than ever are “equity-rich,” meaning their home equity has provided significant wealth to them. How do you join these lucky folks?

    Own a home — one Harvard study showed that homeowners acquire about 27 times the wealth of renters

    Make your payments — homeownership creates “forced savings” in which you’re required to deposit money into your property until you pay off your mortgage — leaving you with a free-and-clear, significant asset

    Use restraint when cashing out home equity with a mortgage or home equity loan. They can be used for any purpose, but some, like investments, contribute to your financial well-being, while others can drain your equity without providing any economic benefit

    Don’t move too often, because buying and selling homes involves significant costs

    Don’t pay too much for your home — check values carefully and know a good deal when you see it

    In addition, choosing a mortgage with a shorter term, or pre-paying your home loan can accelerate the accumulation of home equity and shorten the time you spend making monthly home loan payments.

    Verify your new rate (Jun 17th, 2022)

    Aim for a home equity-rich home

    Buying a home has its perks. These include the ability to grow equity. Equity is the difference between the fair market value of your property and the amount you owe your lender.

    Building home equity is important. That’s because you get to pocket the value of your equity when you sell your home. You can also tap into your equity via cash-out refinance, HELOC, or HELOAN. This allows you to borrow money for things like home improvements, a new business or college tuition.

    A new study shows that more homes are flush with equity than ever before. That’s good news for homeowners. And it’s another good reason to become one.

    What the research found

    Fresh findings from ATTOM Data Solutions reveal that more homes than ever before are “equity rich.” This means the combined estimated amount of loans secured by the property was 50 percent or less of that property’s estimated market value. In the third quarter of this year:

    Almost 14.5 million U.S. properties were home equity rich. That’s an increase of over 433,000 from this time last year. And that marks a new high

    These 14.5 million “equity rich” homes account for over one-quarter of all properties with a mortgage.

    The five states with the highest share of equity-rich homes were: California (42.5%); Hawaii (39.4%); Washington (35.3%); New York (34.9%); and Oregon (33.6%)

    The five metro areas with the highest share of equity-rich homes were: San Jose (73.9%); San Francisco (59.8%); Los Angeles (47.6%); Seattle (41.2%); and Honolulu (40.8%)

    Reading between the research

    Some of these findings amazed Daren Blomquist, senior vice president for ATTOM Data Solutions.

    “Home price appreciation has slowed in the last few months. So I was somewhat surprised to see the number of equity-rich homeowners increase so dramatically,” he says.

    Blomquist believes more owners are home equity rich for a big reason: they’re leaving their equity intact.

    “They’re not tapping into it with cash-out refinancings and home equity lines of credit as much as we might expect. Rising mortgage rates may also have something to do with that, which has put the brakes on refinance activity,” he adds.

    Related: 100 percent home equity loan

    There’s another reason behind rising home equity: Homes continue to increase in value.

    “Steady home price appreciation nationwide over the past few years has handily beat the long-term benchmark of 3 percent annual appreciation. Even with appreciation slowing, we are still seeing about 5 percent annual appreciation nationwide so far this year, ” says Blomquist.

    “And in many markets, we continue to see double-digit appreciation. This is boosting home equity rapidly.”

    Why it’s good to be equity-rich

    Increasing your home equity is smart. That’s because higher home equity is often your best passive path to building wealth over the long term.

    “For most people, the ideal use of that home equity will be for retirement,” notes Blomquist. “So it’s a worthy goal to take a long-term view of that equity.”

    What to expect

    Equity growth rates will vary, depending on your market, your home’s condition, and other factors. But, on average, you can likely expect home prices to appreciate about 3 percent annually over time, per Blomquist.

    “If you hold your home over a period of 20 years or more, that average should be a reliable benchmark. Certainly, there are opportunities to beat that benchmark. But you shouldn’t necessarily count on those,” he says.

    Blomquist believes home equity growth will likely slow in the final quarter of 2018 and in 2019. The reason? Continued slowing of home price appreciation.

    Related: 2019 real estate forecast

    “You should also expect to see some sort of correction in home prices over the next couple of years. This may vary in severity – and may not even happen – depending on the local market. But it’s good to prepare for the worst-case scenario,” he says.

    The good news?

    “This correction will almost certainly not be as severe as the Great Recession housing downturn. That’s when many markets saw a 30 to 50 percent drop in home values. Most likely any correction will involve single-digit depreciation. And it won’t last longer than a year or two,” he adds.

    Source : themortgagereports.com

    How To Become A Millionaire – Forbes Advisor

    Most millionaires are just regular people, not all of whom bring home giant salaries.

    Advisor Investing

    Advertiser Disclosure

    How To Become A Millionaire

    Rob Berger,  Benjamin Curry

    Editor,  Editor

    Updated: Feb 22, 2022, 1:00pm

    Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.

    There are more than 20 million millionaires in the United States. Because many of them capture the attention of the press or become pop culture sensations, it might seem like becoming a millionaire is impossible for everyday people.

    The truth is that you don’t need to develop the next tech unicorn or be a celebrity to become a millionaire. In reality, most millionaires are regular people, not all of whom bring home six- and seven-figure salaries. With a bit of common sense and discipline, you, too, can become a millionaire on an average income.

    How You Can Be a Millionaire

    The first step to becoming a millionaire is to understand the power of compound returns. When you compare a modest rate of monthly savings with a $1 million goal, the challenge seems overwhelming.

    But the key is to realize that the vast majority of wealth comes from compounding. That’s when your early returns lead you to earn greater later returns. Think of it this way: If you earn 10% on $1,000, you’d have $1,100 at the end of the first year, a gain of $100. If you earned that same 10% return on your money the next year, you’d have $1,210, a gain of $110.

    What’s great about compound returns is that they are investment gains you see without having to add more of your own money to your investment (though it’s important to regularly contribute more money to maximize your compounding).

    Compounding Returns Example

    Now, let’s see how compounding can help you become a millionaire. First, we’ll calculate a possible rate of return on our investment. Since 1926, the average annual return on a portfolio with 80% stocks and 20% bonds has been 9.4%. During this same period, inflation has averaged about 2.9%. Based on this historical data, we will assume an inflation-adjusted annual rate of return of 6.5%. By using an after-inflation rate of return, the results of our calculations will show an amount of money in today’s dollars.

    How much we need to save each month to become a millionaire depends on how long we’ll save and invest. Here it’s important to understand that the longer we have to save and grow our money, the less we have to save each month to reach our goal.

    If we want to become a millionaire in 10 years, we would need to save about $6,000 per month. Obviously this is not realistic for most people. But luckily, most people aren’t trying to become millionaires in a decade.

    If they’re saving for retirement, they generally have at least a couple of decades to reach millionaire status. As we extend our investing time period to reflect that, we can begin to see the value of investing early and the power of compounding.

    If we save and invest for 20 years, our monthly savings amount drops to $2,075. Still unrealistic for many people, but we are moving in the right direction. Here’s how much we would need to save each month for different time periods.

    Time Period Monthly Savings

    30 years $940 40 years $465 45 years $330 50 years $235

    It’s important to take a moment to note a couple of things, like the impact of time and compounding. Each decade you wait to start saving roughly doubles the amount you need to contribute to reach your goal. But by the same token, if you start early enough, you can grow your wealth to great sums with only a few hundred dollars a month.

    Accounting for the Impact of Fees

    The above results do not consider the impact of investment fees. If you invest on your own using low-cost index funds, the small fees charged by these types of investments won’t change the results significantly. For investors that pay an advisor or use expensive actively managed mutual funds, however, the results can vary dramatically.

    For example, let’s assume that an investor pays a financial advisor 1% per year to manage their investments. Although 1% may not seem like a lot, it has a dramatic impact on the amount of money that needs to be saved each month to reach our $1 million goal. Here’s how much it would take for them to reach $1 million accounting for that fee.

    Time Period Monthly Savings Without Fees Monthly Savings With 1% Fee

    30 years $940 $1,130 40 years $465 $600 45 years $330 $450 50 years $235 $330

    If the same advisor uses expensive mutual funds charging an additional 1%, as many do, the monthly savings requirement goes even higher. Here’s how things play out as the investor tries to reach their $1 million goal.

    Time Period Monthly Savings Without Fees Monthly Savings With 2% Fee

    30 years $940 $1,350 40 years $465 $770 45 years $330 $590 50 years $235 $460

    As you can see, investment fees, even ones that seem insignificant, can really add up over time.

    Your Employer’s Match Can Help Make You a Millionaire

    Source : www.forbes.com

    How I Used HELOC to Become a Millionaire by 30

    Bryce DeCora was able to quit his day job and become an Airbnb host full-time after two mortgages, a HELOC, and a few maxed out credit cards.

    Premium HOME REAL ESTATE

    I became a millionaire before 30 by leveraging HELOC to buy homes and rent them on Airbnb. It was risky, but my strategy paid off.

    Bryce DeCora Jun 15, 2022, 2:28 PM

    Download the app

    Bryce DeCora and his wife currently own 3 homes collectively valued at $2.5 million. Bryce Decora

    This story is available exclusively to Insider subscribers. Become an Insider and start reading now.

    KEEP READING NORDIC

    I bought 3 Airbnb properties in a year that are all turning a profit. Here's how I built up my side hustle and keep my listings competitive.

    This story is exclusively available for Insider subscribers. Thanks for subscribing!

    More: original contributor Real Estate Advice HELOC loans airbnb host

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    Source : www.businessinsider.com

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