letters to the editor

Median home sales in 95076 in February were $768,000, down 12.7% from last year, according to Redfin.com. Meanwhile, amongst some dire predictions of housing value decline or a housing “bubble” burst, homeowners in Watsonville’s “Adult Villages” are seeing quite the opposite. Home values in the 55-plus neighborhoods of Bay Village and Pajaro Village are at an all-time high with many current homes listed for sale ranging between $500,000 to $699,000, also according to Redfin.com.

With increased home values, many homeowners are realizing increased home equity. Home equity refers to the percentage of your home value that is yours vs. a bank. Someone who has no mortgage or liens on their home has 100% home equity. If you are like many people and you have a mortgage, your amount of home equity is the percentage you own after the mortgage. For example, if you have a $700,000 home with a $350,000 mortgage, you have 50% home equity.

Some people are lucky enough to own their homes outright or have worked hard to pay down a good chunk of their mortgage. Having a lot of home equity can come in handy if you are getting ready to retire or are in retirement. With rising costs of living, it may be a good time to look into using your home equity to improve your cash flow.  

Many banks and mortgage companies offer home equity lines of credit (HELOC). These loans can come in handy for things like needed repairs, but keep in mind that the draw period is typically 10 years (with monthly interest-only payments), and then the loan becomes due with monthly principal plus interest payments due.

A Home Equity Conversion Mortgage (HECM) is for homeowners 62-plus years of age and is insured by the Federal Housing Authority (FHA). *The cost of premiums is the responsibility of the borrowers but may be deferred until the loan becomes due. Also known as a “reverse mortgage,” like a home equity line of credit (HELOC) from a bank/mortgage company, a HECM reverse mortgage lends homeowners money based on a portion of their home value.

An important difference between a HELOC and HECM is that the proceeds from a HECM reverse mortgage (via cash, monthly checks, line of credit or any combination of these) are available for as long as you live in your home as your primary residence, and do not default on the loan terms, without the burden of required monthly mortgage payments. As with any mortgage, property taxes, homeowners’ insurance and HOA dues, if any, must still be paid by the homeowner. Some common reasons why people get a reverse mortgage are to: pay off an existing “forward” mortgage, get cash for major home improvements, fund in-home health care, or establish a growing line of credit for unknown future expenses.

While no one has a crystal ball to know where housing values are going, if you have a sufficient amount of home equity today, you may be able to use it to add spending power to your retirement tomorrow. 

To learn more about home equity in retirement, you are invited to attend a free presentation with Watsonville resident and Mortgage Loan Originator Marina Watts (NMLS #1458297) at the Watsonville Public Library on Wednesday, April 26 at 11am. To register, call me at 535.9760 or email [email protected]

*HighTechLending is not acting on behalf of or at the direction of HUD/FHA or the Federal government.

HighTechLending, Inc., licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act. NMLS #7147. Licensed in CA# 4130937. 2739 Porter St., Soquel. Branch NMLS #1946004. NMLS Consumer Access: nmlsconsumeraccess.org.

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