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How Home Values Impact Home Equity Lines of Credit

The Utah housing market has never been hotter. As a result of extremely high demand and limited supply, the median sales price for a home in Utah has increased by 20 percent in the last year alone. The current median sale price for a single-family home in the state currently stands at about $450,000, and homes in more in-demand locations are selling for much higher prices.

For buyers, Utah is one of the toughest places to find a home in the entire country. For homeowners, home values are reaching unprecedented levels, which boosts equity and bargaining power. But with such dramatic increases in home values in such a short amount of time, what impact does the current housing market have on your home equity line of credit or your ability to apply for a HELOC?

Understanding Equity

In essence, your home’s equity is the difference between your home’s value and how much you currently owe on your home’s mortgage. There are a few ways you can earn equity in your home. If you bought a house 10 years ago for $300,000 and you’ve been dutifully paying your mortgage payments every month since, you have likely earned equity in your home just by virtue of decreasing your existing mortgage with each new monthly payment.

Another way you can earn equity in your home is via the aforementioned market influence. As the local housing market changes, your home’s value can increase over time. That home you bought all those years ago for $300,000 may well be worth $500,000, $600,000 or more (depending on condition, location, etc.) as a result of the increased demand and shortened supply of the current Utah housing market.

New HELOC Borrowers

If you haven’t applied for a home equity line of credit, your ability to borrow money against your home’s equity has likely increased with your home’s value. It’s common for lenders to extend home equity lines of credit up to 80% of the borrower’s existing home equity. That means if your home’s value has gone up, you likely have the luxury of borrowing even more money, just in case you want to finally complete that remodel or new addition, for example.

One of the nicest features of a HELOC is that you can apply for a home equity line of credit and only use what you want, when you want. You don’t pay interest on your HELOC until you actually use the funds, regardless of how much money you have available in your line of credit. That means you can leverage the extra equity in your home now to have more borrowing power, even if you plan to use the actual funds later.

Existing HELOC Users

If it’s been a few months or years since you applied for and received your home equity line of credit, your home’s value may have increased in the interim. That means your home value to home equity ratio has likely changed too. In other words, your existing line of credit represents a smaller percentage of your actual home’s equity. Among other things, that gives you peace of mind, knowing you can better cover the costs of borrowing money. It also means now is a great time to leverage your home’s equity by advancing and using your HELOC funds.

If you need yet another reason to use your existing Utah First HELOC funds, right now you can lock in a great 1.99% rate on all funds advanced before June 30, 2021.* That gives you an affordable way to take advantage of your existing equity to add even more value to your home. And the 1.99% rate is locked in until April 1, 2022.

As a Utah homeowner, you have more power than ever before. You have more bargaining power, more borrowing power, and if you’ve been waiting for the opportune time to use your HELOC funds, you have the power to lock in a great 1.99% interest rate until April 1, 2022. To learn more about whether a HELOC is right for you, or to learn how easy it is to advance your HELOC funds, talk to one of our helpful loan specialists today.

*This offer is available for qualified new and existing HELOC members. All payments made will be applied to the 1.99% rate balance before the previously existing balance. Following the expiration date of the promotion, the rate on outstanding balances will revert to the rate in their previously existing home equity line of credit agreement.

 

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