(BTW I feel like I asked this question before, when the rise in value first surprised me but wasn’t as extreme-seeming as it currently is. But I can’t find that thread if it exists. Apologies if it does!)
The other posters are mostly right that if you don’t want to sell it, the only avenue that a higher price leaves you is to borrow against it. You still have to pay the borrowed money back, but you might get a better rate because you have more equity.
Cautiously. I have had too many friends get in trouble by treating their home equity as a piggy bank. They kept doing cash-out refi’s - and bought toys. Then when the market dropped, they were underwater.
You can get a reverse mortgage if you are old enough and are pretty sure you don’t want to move. Or if you are an “empty nester” and don’t need so much house anymore, you can sell it and buy something smaller and invest the extra cash.
A reverse mortgage is most useful if a) you want to have more money to spend in retirement, and b) you don’t mind that you won’t have a house to leave to anyone - when you or your spouse dies (whichever of you is last to go) the house goes to the bank. If you later change your mind and want to sell, you have to pay back the reverse mortgage loan out of the proceeds. Also if you leave the house, e.g. you’re the survivor and you have to go into some kind of nursing facility without selling the house, the bank gets it.
And even then, if you think this is the right way to go, investigate very thoroughly. Different companies offer widely different results.
You can pay more in property taxes as the value continues to rise.
We’re in a similar situation with the ratio you’ve experienced, but higher numbers and longer timeline. If we wanted to move, any house that had what we want in a location we liked would be the same price or higher.
At this point (we’re both in our 50’s) we’ll probably move when we’re ready for retirement, to somewhere our money will go further.
If you’ve got the stomach for it: Refi to get at as much equity as you can. Use that equity to buy a second property to use as a rental (long game) or a flip (quick money). Sounds like your market would net you some good gain on a rental held for 3 years and then sold.
There are mortgages that essentially let you pre-sell your house now and continue living in it until you die. As I understand it, you get a cash sum now and you sign a contract that turns the house over to the company when you and your spouse are dead.
The upside is you get a large bunch of money to spend and you don’t have to move. The downside is you can’t later sell the house and you can’t leave it to your children as part of your estate. Plus you have a faceless corporation that stands to make a large profit from your death, if you worry about that kind of thing.
B-Rad’s option is valid, if you’re up for it. Buy a second home and rent out the one of the two homes you don’t want to live in. Make sure the rent covers the mortgage and taxes, and it’s a decent investment. You should come out of it owning two houses. This is not a bad way to add to your retirement income.
Re-financing just to get the best possible terms is valid, if your current rates are higher than market rate. It’s valid to take enough out to pay off all other debt, as long as you have a real plan for managing that debt moving forward so it doesn’t grow again. I’m speaking of things like credit cards. You don’t want to pay those off and then just balloon them up again in another year (not saying that’s you, just running through use cases).
You could start paying down your mortgage faster OR re-finance to a lower interest rate, so that making the same payment pays your house down faster.
I’m not familiar with the rules in the US but they’re probably not all that different from the ones in Canada, though as you say, different companies have different rules and some of them are scumbags. That said, however, (b) is not correct as a universal rule. It’s certainly possible that if you stay in the house with a reverse mortgage for a very long time, the magic of compound interest which works so well for investors could indeed wipe out the equity in your home including any additional appreciation. However (again, this is only the rules as I understand them here in Canada) there is no reason a reverse mortgage couldn’t be used as an interim source of cash if you’re planning, say, to rent or move to a retirement community later on. The rules here are that you can get out of the whole thing with no penalty after five years. Before that, you will owe a penalty on a sliding scale that is still substantially less than the interest payments you committed to anyway. In either case, you are then free to sell, pay off whatever you borrowed, and pocket the rest.
The best way to use the equity is to use a second mortgage to pull the money out. From there it’s up to you if you want to invest in stocks or real estate or something else. I would figure out what your strengths are and then decided based on that if you’re good at working around the house and fixing things then real estate may be a good bet but if you’ve got to hire a handyman for everything you’ll make way less money. On the other hand, it’s hard to beat a nice diversified portfolio of dividend stocks to give you a bit of money in your pocket a handful of times per year.
Really the best thing is to figure out how you’d invest the money, look at the expected returns, then compare them to the current appreciation of your house and see what makes the best sense. If you’re doubling every three years that’s going to be tough to beat.
To add to the above (post #14), needless, to say, this only applies to elderly retired persons. And also to add, if the last spouse dies, then the heirs get to do what I just described – sell the house, pay off the reverse mortgage balance, and keep the rest. It’s only over really long time periods that you may eventually lose all equity because of accumulating compound interest, assuming property appreciation doesn’t exceed that.
For younger people I think the best bet is to do nothing and enjoy the knowledge that the appreciation in value gives you extra financial security. Sleep better at night. If for some reason you need the cash for a solid investment, consider a home equity line of credit. One couple I know – not that I would recommend doing this – used the extra money as a down payment on another house, figuring they were expanding their real estate holdings in a rising market. Had they stuck to their plan, this actually could have worked out terrifically well as the market has been incredibly hot around here. But they found that the rental business was far more hassle than they had ever imagined and got out of it.
My advice: Don’t do anything right now. * It’s only been 3 years.* Sit tight for at last another 2 years, preferably 4, before you do anything rash. But refinance if it makes sense (that’s always going to be the case, even if you home drops in value). Just be aware that you’ll be starting the clock at 30 years again, assuming you get a 30-year loan.
Do you own it outright or are you paying down a mortgage? We owe 35,000 on a house and land we bought for 144,000, neighbors are getting 300k right now selling within 2 weeks of listing, and prices still going up. Our Certified Financial Planner has told us to sit tight and do nothing. It’s 250,000 we never dreamed we’d have, such a nice warm security blanket. Do look to your insurance to make sure you have full replacement value covered, and if you decide to risk your equity be damn sure you know what you’re doing.
HUD requires a class, not classes. And a cert of completion - albeit a phone interview.
And, It’s FHA insured, so if you owe 100k more than the house is worth, FHA pays the difference.
You have to make property tax payments and keep it insured.
If you have shitty credit, they will hold back reserves to cover those payments and require you to sell the house (You agreed to keep it insured and current with the taxes)
Please, don’t listen to information that is grossly inaccurate. HUD has a whole section on it. Visit it if you’re interested.