You can benefit from today’s sky high home values and historically low mortgage rates without necessarily having to sell your house. Here’s how to leverage your home to reduce debt and build net worth during this magical time when your home equity is worth more than ever.

An unexpected thing happened during the pandemic: People started saving more money than they had been before COVID. But it does make sense that a global health scare would cause people to think harder about how much money they have saved up, the same way many of us start saving for retirement when retirement is already a little too close for comfort.

The Bureau of Economic Analysis defines “personal savings rate” as the percentage of your income you have left after you pay your taxes, cover your bills and order some stuff from Amazon. Here are some recent averages:

December 2020—13.5%
March 2021—27.6%

If you’ve already been saving your pennies and now want to keep building on your net worth by increasing the value of your investments or reducing debt, you may be wondering how you could take advantage of real estate market conditions to squeeze the most out of your most valuable asset. Let’s dive in.

DO A CASH-OUT REFINANCE

With a regular refinance, you replace your existing mortgage with a new mortgage for the same amount of money but at a better interest rate. With a cash-out refinance, you replace your existing mortgage with a new mortgage for more than what you owe and then you get the difference in cash. You can use the cash however you want—pay off debt, add to your IRA, make home improvements, etc. You can usually get a lower rate on a cash-out refinance than a debt consolidation loan and, thanks to rising home values, more and more homeowners have been qualifying.

INVEST LIKE A BUFFETT (WARREN OR JIMMY)

Property values increase all by themselves, adding to your net worth while you’re watching Netflix. Each time you make a mortgage payment, three things happen: your debt gets lower, your equity grows, and your property becomes more valuable. So buying investment property is usually a good idea. If one house is enough and you want to focus on the property you already have, make sure you’re making the most of it by getting rid of PMI payments if you have them. Make extra mortgage payments until that PMI is gone forever.

SELL & DOWNSIZE

If you’re thinking about moving into a smaller house one day, do it now. Selling your bigger house while property values are high will maximize your profit, and buying property while interest rates are low will reduce the size of the mortgage payments on your new house.

But wait, there’s more. Downsizing also reduces your living expenses, including homeowners insurance, property taxes and utility bills. It adds up!

Christy Rosen Clement is a Pricing Strategy Advisor®, Seller Representative Specialist®, Military Relocation Professional® and REALTOR® at Palermo Real Estate Professionals in South Tampa