Many Triangle owners are now “stock rich”; here’s how to cash out

RALEIGH- Raleigh’s real estate market value continues to rise, as do median home sales prices. As potential buyers struggle to navigate a competitive market, rising prices and rising mortgage interest rates, more than 56% of Triangle area homeowners are now considered “stock rich,” according to a new report from ATTOM Data Solutions.

This represents an increase of approximately 95,000 homeowners in the Raleigh Metropolitan Statistical Area (MSA) and approximately 26,000 in the Durham-Chapel Hill Metropolitan Statistical Area in the past year alone.

A homeowner is considered “stock-rich” if their home is worth at least twice as much as the remaining balance of their mortgage.

In the Raleigh MSA, which includes Wake, Johnston and Franklin counties, there are 302,186 outstanding mortgages, the data shows. Of these, 170,493 properties are now worth at least twice as much as the loan balance.

In Durham MSA, which includes Durham, Orange, Chatham, Person and Granville counties, there are 100,565 properties with outstanding mortgages, and 56,802 of them are worth more than double the remaining balance, according to ATTOM.

In the Triangle, median home sales prices rose 24.2% between March 2021 and March 2022, according to the latest data from the Triangle Multiple Listing Service. And, a spokesperson for national real estate technology company Zillow told WRAL TechWire that the total value of Raleigh MSA’s residential real estate market was over $4 billion at the end of 2021.

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How Homeowners Can Access Equity

For owners who have seen an increase in net worth, there are a growing number of options to access it.

Since lenders are able, in some cases, to provide mortgages of up to 80-85% of the value of the home, homeowners with a high level of equity have the option of refinancing with a mortgage lender, take out a second home loan secured by the property or open a home equity line of credit.

Many Wake County residents have applied for refinance loans in recent years after the pandemic began, according to the Wake County Deeds Registry Office, which has seen a growing gap between the number of deeds registered and the number of trust deeds registered.

A deed is filed whenever a real estate transaction is entered into, and a trust deed is registered when a mortgage loan is granted to a homeowner by a lender.

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Equity Access Options

Homeowners with equity have options, said Jon DeHart, a Durham-based mortgage broker with Movement Mortgage.

“First, they could do a cash refinance,” DeHart said. This is where a lender would qualify a borrower or borrowers based on income, a property appraisal and other documentation, for a new mortgage. And at closing, the lender would provide a cash payment to the owner, leaving that owner with more cash.

Then, DeHart said, there’s also a home equity line of credit, which provides certain benefits to homeowners.

“If you choose equity margin, you can access it when needed,” DeHart said. “And another benefit is that you can usually make interest-only payments.”

But with mortgage rates rising, DeHart said, it’s important for borrowers to understand the pros and cons of the financial products they’re considering.

People can use money from a refinance or line of credit for a variety of reasons, DeHart said. A common reason, DeHart said, is to consolidate consumer debt or pay for something, a consumer purchase that you need immediately.

Others may choose to do home renovations. And, for homeowners considering buying a new primary residence, access to existing home equity provides an additional mechanism that some might consider using in a property search.

It’s more expensive than ever to buy a Triangle home, and interest rates are also rising

Buy before you sell

“You have people who have untapped equity in their homes,” DeHart said. “But they want to buy a house before they sell their current house.”

The reason this makes sense, DeHart explained, is that by moving from an existing residence to a new home, the old home can be better prepared for sale. Repairs can be made, homes can be staged, viewings can be coordinated and a deal negotiated, all without having to also live in the property and maintain it for the duration of its listing on the open market. or under contract, pending a sale.

A home equity line of credit would be a useful tool for homeowners in this example, assuming that homeowners would qualify and accept the risks associated with possibly having three mortgages at the same time.

“They can take out a line of credit to access the equity in their home,” DeHart said. “And then, because it would be a relatively short-term loan, because they’ll be paying off equity before rates go up, after they sell their current home.”

And, in today’s real estate market, having additional access to capital can mean the difference between winning a deal or losing it.

“They will be able to use the money taken out with the equity line to put down a deposit, or due diligence, or down payment, when buying a new home,” DeHart said.

“Let’s say there’s a townhouse they own that’s worth $400,000, and they have a remaining mortgage of $150,000,” DeHart said. “They could take out a home equity line of credit of up to $170,000, assuming they would qualify for the loan through regular underwriting.”

Staying in place

But not everyone may be looking to move.

“Homeowners who are equity-rich are in a great position,” said Joe Cianciolo, co-founder of tech startup HomePace, which offers a different approach to mortgages for homeowners looking to access equity. of their house.

“A home is often someone’s greatest asset, and it pays to control as much of it as possible,” Cianciolo said. “However, it can be difficult if they have pressing financial needs.”

Too often, home equity feels like a stranded resource, Cianciolo said, that can’t be used.

The Salt Lake City-based company launched operations in North Carolina earlier this year.

Cianciolo lives in Wake Forest and told WRAL TechWire last month that he expects the company to hire heavily in the Triangle area and establish a Triangle office within the next 12 months.

HomePace operates with a different structure than a mortgage lender, Cianciolo told WRAL TechWire. “Technically it’s an option deal,” he said. “It’s a form of capital instead of debt.”

Think of it like how a startup might raise capital. Sometimes a startup will seek debt from investors, and investors will receive payments on that debt over a period of time. But an investor may prefer to take a stock position, which does not guarantee redemption, but could have high upside potential if the value of the company increases.

“We give someone an amount of money up front, and in exchange we share the future value of the house,” Cianciolo said. The company provides services to existing owners as well as potential buyers, in that it can provide capital for a down payment through the company’s option agreement.

“Share a percentage of the gain, when they decide to sell,” Cianciolo said. “But we will also share the same percentage in the event of a decline in value.”

“Of the North Carolina homeowners we worked with, nearly two-thirds primarily use their home equity to pay off debt,” Cianciolo said. “Because home equity investments allow you to leverage the equity in your home without taking out a new loan, it’s an ideal solution for homeowners looking to pay down debt.”

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