SIOUX FALLS, S.D. (KELO — A year of booming real estate in KELOLAND has brought a big boost in home values all over the state.
But for those current homeowners not yet ready to sell, mortgage bankers say there are still ways to capitalize on the big increase in home equity.
“This is a great house for our family, we plan to be here for a long time,” Sioux Falls homeowner Steve Larsen said.
After nine years in their home, the Larsen family still has no plans of moving but discovered they have quite a bit of equity built up.
“The equity in our home was way more than I anticipated,” Larsen said. “It was shocking.”
For years, homes in the Sioux Falls area would typically see about a four percent increase in value each year.
“This last one was 18 percent; 18 percent year over year appreciation in July. We’ve never seen anything like that,” Plains Commerce Mortgage Loan officer Kevin Carlson said.
Carlson says growth that fast means a lot of opportunities for homeowners, especially those currently paying mortgage insurance.
“You have to have mortgage insurance on the loan until you achieve a certain amount of equity or ownership in the house,” Carlson said.
The recent explosion in home values may mean you can avoid paying that extra monthly bill.
“Now we’re able to remove the mortgage insurance by refinancing after they’ve been in the house a very short time, sometimes just a couple years, a process that used to take 8 to 10 years,” Carlson said.
And with the historically low mortgage interest rates that have stuck around since the pandemic hit last year, the increased home equity is also a chance to consolidate your other high-interest debt like credit cards, students loans and more.
“Let’s say you have a loan for $200,000 right now, and you have $50,000 in high-interest debt, you can redo your loan for $250,000 and take that $50,000 pay off your debt,” Carlson said. “If you can move something from 15 percent down to three percent, this is the time to do that.”
Refinancing to a higher loan value can also allow homeowners to take cash out of their home.
“Maybe instead of selling, you can refinance, get that money out, improve your house, make it the house you’ve always wanted it to be, without having to sell the house,” Carlson said.
And for some homeowners, these kinds of refinance options can also mean getting a better loan.
“We did get a lower rate with our refinance, we already had a great rate, but it was better, and we changed the terms,” Larsen said. “We shortened the length of our mortgage for this house, and looking long term we’re saving a lot of interest dollars.”
Whether you’re looking for a better interest rate, to get rid of mortgage insurance or pull cash out of your home, Carlson says it’s always best to call your mortgage lender to run the numbers and see what works best for your situation.