Macomb County Michigan How Buyers & Sellers Can Win By Downsizing in 2020
By: Rick Giese RE/MAX First
Here's some more good news: mortgage rates are expected to remain low throughout 2020 at an average of 3.8% for a 30-year fixed-rate loan.
The combination of leveraging your growing equity and capitalizing on low rates could make a big difference in your housing plans this year.
How to Use Your Home Equity
For move-up buyers, the typical pattern for building financial stability and wealth through homeownership works this way: you buy a house and gain equity over several years of mortgage payments and price appreciation. You then take that equity from the sale of your house to make a down payment on your next home and repeat the process.
For homeowners ready to downsize, home equity can work in a slightly different way. What you choose to do depends in part upon your goals.
According to HousingWire.com, for some, the desire to downsize may be related to retirement plans or children aging out of the home.
Those who choose to put their equity toward a new home have the opportunity to make a substantial down payment or maybe even to buy their next home in cash.
If you're planning to downsize, keep in mind that home prices are anticipated to continue rising in 2020, which could influence your choices.
The Impact of Low Mortgage Rates
Low mortgage rates can offset price hikes, so locking in while rates are low will be key. For many downsizing homeowners, a loan with a shorter term is ideal, so the balance can be reduced more quickly.
Interest rates on 10, 15, and 20-year loans are lower than the rates on a 30-year fixed-rate loan. If you're downsizing your housing costs, you may prefer a shorter-term loan to pay off your home faster. This way, you can save thousands in interest payments over time.
If you're planning a transition into a smaller home, the twin trends of low mortgage rates and rising home equity can kickstart or boost your plans, especially if you're anticipating retirement soon or just want to live in a smaller home that's easier to maintain. Let's get together today to explore your options.
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Rick Giese RE/MAX First