I have been considering whether or not to use a home equity product to access the equity in my home. With recent news around the Federal Reserve cutting rates, I am wondering how lower interest rates could impact my home value or my ability to access the equity in my home.
– Wondering What to Do
Dear Wondering What to Do,
That is a great question, especially following the Fed’s recent announcement in mid-September that it would trim rates for the first time since the Fed hike-cycle began in early 2022.
While there are a number of factors that can and will impact home values and a homeowner’s ability to access the equity in their homes, there are a few things to consider.
Impact to Ability to Access Home Equity
– Lower interest rates reduce borrowing costs. Home equity products that have an interest rate component will be less costly than they were before rates were cut.
– Lower interest rates can also make refinancing more attractive. When homeowners refinance, they might access a portion of their home equity at a lower cost of borrowing. Additionally, homeowners that refinance into a cheaper mortgage rate will then have a reduced monthly mortgage payment, potentially increasing financial flexibility and making it easier to tap into home equity through various home equity products.
Impact to Home Price
– At the same time, when borrowing becomes cheaper, demand for housing tends to go up as homeowners can afford higher-priced properties. This higher demand can have the effect of driving up home values.
Ultimately, lower interest rates can have the effect of enhancing home values and increase opportunities for leveraging home equity. If you are interested in considering a Home Equity Investment (HEI) to access your home equity without interest or a monthly payment, the Aspire team can help you understand how it works. Contact Us today.
