Congratulations to Mike & Torrey.
They bought a beautifully remodeled home in the Cole/RINO neighborhood this summer.
Disclaimer: We are not lenders, we are not financial advisors, we are not accountants, we are not attorneys.
Do you have home equity? Wondering how you can use it to your advantage?
So you bought a home a few years ago and have EQUITY! The value has gone up, but how can you use the gain in value to your advantage? Home value is not a liquid asset, but with a tool called a Home Equity Line of Credit (HELOC) you can utilize your equity on your primary residence without selling your home. There are several institutions that offer this type of credit and we’ve done some shopping around for you to help you pick the best program.
We called the top five banks that were recommended for their HELOC programs. We gave all of them the same scenario. The given scenario was: The homeowner’s agent said their house is worth $500K. The owner purchased the home for $400K two years ago and currently has a loan on the property for $380K. Their credit score is 750, income is $60K, debt = $2000/m for mortgage, $250/m car payment, $3000 in credit card debt.
Disclaimer: Rate fluctuate everyday and are based on your personal scenario, the rates below are just estimate for demonstration. Rates were as of July 2019.
The amount of money you can borrow for a HELOC will be calculated by multiplying the current home value by the percentage (typically 80-90%) and subtracting the current loan on the property. EX: $500K (current home value) x .89 (loan to value) = $445K – $380K (loan on home) = $65,000
Here is how we would rank the HELOC programs that we researched.
1. Bellco – 80% at a fixed 3.99%, 80-90% at a fixed 4.49%
2. Red Rocks – 89% at a 5.5% adjustable rate
3. Vectra – 85% at 5.35% to 5% adjustable
4. US Bank – 85% at 6.3%
5. Chase – 80% at 9.38%
Here are some assumptions you can make about most HELOCs…
1. Will have an adjustable rate and will fluctuate with the market rate during the term of the loan. BELLCO is running a special right now on a FIXED RATE HELOC
2. Can only be taken out a your primary residence
3. Payments are typically interest only
4. You will have to pay for an appraisal, closing cost, and it will usually benefit you to open an account at the institution
5. Unlike a second mortgage, a HELOC gives you access the the equity but you don’t have to pull out a lump sum
So now that you know what some local banks are offering, let’s think through a few scenarios on how you could utilize a HELOC. We must mention, HELOCs are NOT bottomless piggy banks to fund affluent lifestyles that you really can’t afford. The frivolous use of HELOCs in part lead to the Great Recession in 2008.
1. Moving Up – Many homeowners utilize the equity they have in their first home to purchase a second home. In Denver’s competitive housing market it can be extremely difficult to purchase a new home with a contingency to sell your current home. Also, many families don’t want to sell their current home without having a replacement home under contract. HELOCs are a solution many buyers are utilizing to avoid this dilemma. You can make an non-contingent offer, use funds from a HELOC as the down payment on your replacement property, and close on your new home THEN list your first home. With the proceeds from the closing of your first home you will have to pay off the first mortgage and HELOC in full. All the banks we spoke with confirmed that a HELOC can be used for anything… including the purchase of another home, but MAKE SURE TO CHECK WITH YOUR LENDER!
2. Home Improvement – Are there aspects of your home that you would like to improve? If so, a HELOC might be a great option for you. A HELOC allows you to borrow against the equity you already have in your home. Allowing you to finance these larger purchases over time instead of in one lump sum. Keep in mind that many of these rates are typically not fixed and payment are interest only, so having an established payment plan that includes a strategy to pay down the principle will be in your best interest. When considering home improvements, be sure to be mindful and discuss your improvement plans with your trusted real estate agent. Your agent can help you navigate what improvements are going to bring the most value back into the home when you sell. Take it from us, there is nothing more discouraging than putting a lot of money into a home that does not increase the value.
3. Consolidating other higher interest loans – Have you evaluated the interest rate on your student loan and credit cards? It can be extremely difficult to pay off high interest loan debt if you interest rate is 19.24% (average credit card interest rate). It might benefit you to use a HELOC to pay off debt with a higher interest rate.
We can help you with any real estate questions including: How much is my house worth? What is the best strategy to buy a second home? What renovation projects give the best return on investment. Call us: 303-720-8491
Did you get your “notice of valuation” from the city of Denver? The city is working hard to accurately value your property so they can fairly tax households throughout the county and raise money for public services and projects. Denver recently launched a program called the Denver Tax Receipt where you can actually see exactly where your tax dollars go, I highly recommend checking it out!
Your valuation should be close to you Zestimate or actual market value of your property. If you are the worst house on the block, your property value probably came in higher than the actual market value. If the valuation is not accurate, you have the ability to protest it with the city by June 3rd. Please email me if you need help protesting this value (kassidy@LivingRoomDenver.com).
Did you know Colorado is ranked 5th nationally for most affordable property tax valuations? Our taxes here are actually very low. The median household in Colorado is paying about $1500 in taxes per year in property taxes. The highest state property taxes are in New Jersey where residents pay $7840/year. California has a bad reputation for high taxes, but residents are paying about $3414/year. The red state of Texas actually has very high property taxes, ranked 45 of 50 making it one of the most expensive state property taxes. We looked at tax rates at a state level, but remember that your actual taxes will be determined by the combination of state, county, and city taxes.
Once I understood where your taxes go by using the Denver Tax Receipt, I felt very proud to be contributing to fund the important services that make our great city run. I’m also grateful to live in a state that has affordable taxes when compared to other places. It’s a whole new perceptive once you start looking at the big picture!
We have posted the entire series of videos that we made highlighting some of the most important things to know about Denver Real Estate.
Follow the link below to watch the youtube playlist.
I love sharing with my clients the different ways to make their real estate purchases smart investments. I want to share with you my six favorite ways to invest in the market.
The Classic Move Up
Start small and every few years sell your current home and upgrade into something bigger. Great for every phase of your life – condo, townhouse, single family to a mansion. As your life grows, your home grows with you!
Live with roommates who pay the mortgage. This is great for people who like communal living. Room size, privacy, and two living rooms are important. This is a great way to get started as a young person before you have permanent roommates aka a husband/wife and children!
Find a place that has a separate area which can be rented short-term. Great for people who travel a lot and live in highly desirable areas. It is smart to avoid HOAs and in Denver, it must be the primary residence to legally rent short term.
Find a place that needs improvement. This is great for people who are handy and have excess time and cash. Best if you can find these deals off the market! If you do it yourself, you must have cash for the materials. A renovation loan can also be an option if you plan to hire a general contractor. If you are doing a quick flip, remember that if you live in the home less than two years, plan to pay taxes equal about 30%.
Denver & Mountain Balance
Purchase a second home in the mountains and AirBnB your Denver place on the weekends or vice versa. Great for people who love to ski and hike but also have obligations in the city. Live the ideal Colorado life and make a great income while doing it!
Real Estate Retirement
Purchase a new primary residence every two years, converting your old primary into a rental, and never sell. Great for people who want to retire and not work anymore. If you focus on cash on cash return when you make the initial purchase, you should be able to cash flow each investment for monthly residual rental income. Within 10 years you could be making about $5,000 per month. After thirty years it is pure profit and ideally, the values of the homes have tripled.
For every closing, I donate a $150 to The Park People to plant one tree in Denver. On Saturday, April 27th they are distributing trees those trees and can always use volunteers. It is a wonderful organization that is helping to make Denver more beautiful. To find out more information see the link below.
To learn more about The Park People and sign up to volunteer.
Also, on SEPT 5th they are celebrating their 50th anniversary. I’ve been helping plan the celebration at Denver’s City Park Pavilion and it is sure to be a fantastic evening. SAVE THE DATE and attend!
In 2018 we saw the same pattern of the past with a very hot spring market that cooled down when inventory came on in June. September was an unusually slow month due to the midterm elections. The blue columns behind show the percentage of ask price. At the first circle where demand and supply are very tight, you can see that sellers were getting over their asking price. As inventory increased, many listings were going under asking in the Fall.
We definitely saw prices go up in the first half of the year as the Spring bidding wars escalated prices. The highest prices were in April, which would have been clients shopping for homes in March when you see the under contracts peak in the first graph. Although prices dropped after June, they didn’t dip under $415K where we started the year in 2018.
In 2018, listing went under contract faster than average in the beginning of the year, but at the end of 2018 homes actually stayed on the market longer than average between 2013-2017. You can see that in March, April, and May homes were only on the market for about five days. That means they get listed on Thursday, have an open house on Saturday, and are under contract by Monday. This is a very typical pattern for Denver during the Spring market.
4761 E 98th Pl, Thornton, CO 80229
This immaculate townhome was built in 2016 with numerous upgrades. Upon entering the main level, you are welcomed with natural light and a very spacious entertainment area. The kitchen features granite countertops with maple wood cabinetry. It has an open concept layout that creates a fluid transition from the kitchen into the living and dining spaces. The townhome has a comfortable front patio with unobstructed views and a private back-patio space that leads into a joined grassy open area. There are two bedrooms, a master and second bedroom. Both rooms are located on the top level and have vaulted ceilings and their own private bathroom. The washer and dryer are conveniently located on the top floor. The home also has a tandem two car garage with a storage closet. The neighborhood is conveniently located near the RTD light rail station. The Cornerstone Clubhouse is large and can be reserved for special occasions plus it has an outdoor pool, fitness center, and community playground.
Back Story: Ashley and Ezra were out with their dog when they saw my listing sign for a property in Arvada and called me on a Saturday. I met with them that evening to show them my listing and a few others nearby. They got really serious right around Christmas time and we found their house on January 1st. We were able to get it $25K under asking price and $7K of concessions! Their dog Ella was a major motivating factor and we were all devastated by her unexpected death while they were under contract. 💔 They stayed strong and we close last Friday. This week they moved into their house during a crazy snow storm. They plan to do a kitchen overhaul, can’t wait to see final result!
Want to relive their home buying experience? Go to @kassidybenson on Instagram and check the stories under “Ash&Ezra Buy”