This represents an increase of about 95,000 homeowners in the Raleigh metropolitan census area (MSA) and about 26,000 in the Durham Chapel Hill census area in the last year alone.
A property owner is considered “rich in equity” if their home is at least twice the outstanding balance on the mortgage.
In Raleigh MSA, which includes Wake, Johnston and Franklin counties, there are 302,186 outstanding mortgages, according to the data. Of those, 170,493 properties are now worth at least twice the value of the loan balance.
In Durham MSA, which includes Durham, Orange, Chatham, Person and Granville counties, there are 100,565 properties with mortgages outstanding, 56,802 of which are worth more than double the balance remaining, ATTOM says.
Across the Triangle, median home sale prices rose 24.2% between March 2021 and March 2022, according to the latest data from the Triangle Multiple List service. A spokesperson for national real estate technology firm Zillow told WRAL TechWire that the total value of the Raleigh MSA residential real estate market was more than $4 billion at the end of 2021.
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How do homeowners access equity
For homeowners who have seen an increase in equity, there are an increasing number of options for how to access it.
Since lenders are, in some cases, able to offer mortgages of up to 80-85% of a home’s value, homeowners with a high level of equity have the option of refinancing with a mortgage lender, obtaining a second home loan secured by property or open a line of credit to buy a home.
Many Wake County residents have sought out loans to refinance in recent years, after the outbreak of the pandemic, according to the Wake County Registry Office, which has seen a growing gap between the number of registered bonds and the number of registered trusts.
A deed is given any time a property transaction is closed, and a deed of trust is recorded when there is a mortgage loan being given to the property owner by the lender.
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Copyright Access Options
John Dyhart, a mortgage broker in Durham with the Mortgage Movement, said homeowners with equity have options.
“First, they can do cash refinancing,” DeHart said. This is where a lender or borrower based on income, property assessment, and other documentation will qualify for a new home mortgage. Finally, the lender will provide a cash payment to the homeowner, allowing the owner to have more cash on hand.
Next, DeHart said, there’s also a line of credit for home purchases, which offers some benefits for homeowners.
“If you choose the stock line, you can access it if the need arises,” DeHart said. “Another advantage is that you can usually only make the interest payments.”
But as mortgage rates increase, DeHart said, it’s important for borrowers to understand the advantages and disadvantages of the financial products they are considering.
DeHart said people may use cash from a refinancing or an equity line of credit for a variety of reasons. One common reason, DeHart said, is consolidating consumer debt, or paying for something, a consumer purchase that you might need right away.
Others may choose to make home renovations. And for homeowners considering purchasing a new primary residence, access to existing home ownership provides an additional mechanism that some may want to use in their home search.
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Buying before selling
“You have people with unexploited equity in their homes,” DeHart said. “But they want to buy a home before their current home is sold.”
DeHart explained that the reasoning behind this is that by moving from an existing residence to a new home, the old home can be better prepared for sale. Repairs can be completed, homes can be organised, offers can be coordinated and a deal negotiated, all without having to live in and maintain the property during the time it will be listed on the open market or under contract, pending sale.
A home equity line of credit might be a useful tool for owners to employ in this example, assuming that homeowners would qualify for it and would accept the risks associated with, perhaps, owning three mortgages simultaneously.
“They can get a line of credit out of the equity to access the equity in their homes,” DeHart said. “And then, because it will be a relatively short-term loan, as they will pay off the equity before the price increase, after they sell their current home.”
And in the current real estate market, additional access to capital can be the difference between winning or losing a contract.
“They will be able to use the cash taken with the stock line to pay as down payment, due diligence, or make money, towards the purchase of a new home,” DeHart said.
“Let’s say there’s a townhouse they own, worth $400,000, and they have a $150,000 remaining mortgage,” DeHart said. “They can get a home equity line of up to $170,000, assuming they would be eligible for the loan through regular underwriting.”
But not everyone may be looking to move.
“Rich equity homeowners are in a great position,” said Joe Cianciolo, co-founder of tech-backed startup HomePace, which provides a different approach to mortgage lending for homeowners looking to access equity in their homes.
“The home is often a person’s biggest asset, and it pays to have as much control over it as possible,” Cianciolo said. “However, it can be difficult if they have urgent financial needs.”
Often, equity in a home appears like a closed resource, Cianciolo said, it can’t be used.
The Salt Lake City-based company launched its North Carolina operations earlier this year.
Cianciolo lives in Wake Forest, and told WRAL TechWire last month that he expects the company to recruit heavily in the Triangle area and set up a Triangle office in the next 12 months.
HomePace operates with a different structure than a mortgage lender, Cianciolo told WRAL TechWire. “Technically, it’s an option agreement,” he said. “It’s a form of equity rather than debt.”
Think of it like how a startup would raise capital. Sometimes a startup will seek loans from investors, and the investors will receive payments for this debt within a certain period of time. But an investor may prefer to take an equity position, which does not guarantee repayment, but can have a significant positive side in the event of an increase in the value of the company.
“We give someone a sum of money up front, and in return, we share in the future value of the house,” Cianciolo said. The company offers services to existing homeowners as well as to potential home buyers, as it can provide down payment capital through a company option agreement.
“Share a percentage of the gains, when they decide to sell,” Cianciolo said. “But we will also share the same ratio if there is a decline in value.”
“Of the North Carolina homeowners we’ve worked with, nearly two-thirds primarily use home equity to pay off debt,” Cianciolo said. “Because investments in home ownership allow you to take advantage of your home ownership without taking out a new loan, it is an ideal solution for homeowners looking to pay off debt.”