PART 1 of Everything You Need To Know About Your Home's Value series
Your home is your greatest asset. When you know more about your home and its value, the more empowered you are to make informed decisions regarding your property. Whether a sale is imminent or not, determining how much your home is worth will help you become ready for your next steps. When things come up or when life throws a curveball, as they say—may it be a new job in another area or you need a little help with your finances—you will be ready and can make your investment work for you.
If you still aren't convinced, here are five useful reasons why you should know the value of your home:
1. Homeowners insurance
When you purchased your home and drew up an insurance policy, it should have covered at least what you paid for your property. But after a few years of paying your mortgage and doing some upgrades, your home has likely increased in value. In this case, it might be time to reevaluate your homeowners insurance policy. You can set up a meeting with your insurance company for a refresher on your coverage policy. Knowing your home's value will make sure you’re covered for the cost of its full value if something were to happen.
2. Property taxes
Your property tax bill is based on the assessed value of your property, and factors such as your property's size, construction type, age, and location can affect it. If you think your county or municipality has appraised your property value too high, you can appeal your tax bill.
By having a formal appraisal that will reveal the real value of your home, you can appeal the city’s assessment so you can have lower payments. The appeal process varies by area, but a written request together with the appraisal and research about recent home sales in the area will help convince the tax office that you’re paying too much in property tax compared to the market. It might sound like a hassle at first, but remember that a lower property tax bill means some savings.
3. Home equity
When you know the value of your home, you'll see how much equity you’ve built up. And when you reach the point where the value of your home is more than what you owe in mortgage, you may be able to take out a Home Equity Line of Credit or HELOC. This loan uses that equity as a collateral and can be repaid on a fixed interest rate. You can use this fund to give you more financial flexibility, such as to get financing to start home improvements that will add value to your home, or even invest in a second property.
Likewise, if you’re thinking of refinancing so you can capitalize on today’s low mortgage rates, the more equity you have in your home, the better is your chance to qualify for a more desirable loan term, provided that you also qualify for other credit considerations.
4. Home improvements and repairs
Knowing your home's value is also crucial to help you decide if upgrades or repairs are in order. You want to understand where your property value is starting at, as it will give you a good basis for determining what you want to do with it. You want to make sure that any improvements you make will not only make your home comfortable to live in, but will also potentially increase the value of your property.
It’s a good idea to prioritize projects that will enhance your home’s value, such as a kitchen or bathroom remodel, to ensure that the renovation costs will pay off. Also, you want to make sure that your upgrades match the other homes or “comps” in your neighborhood if a return on investment is important to you.
5. Selling your home
One of the major reasons why you should know what your property is actually worth is that it can help you decide whether to put it on the market. And when you know your home's value, you can be confident in setting a sale price. You don’t want to sell your biggest financial asset for what you just think it may be worth, only to find out later that you could have gotten much more out of it. By checking your property’s value before you list it, you will know what to expect to get from the property when you sell to potential buyers.
Remember: don’t put up a ‘For Sale’ sign just because you’ve known that your home already has value in it and you think there’s more money on the table. However, if you’ve been ready to put your home on the market for quite some time now and are planning to move this year, then knowing your home’s worth will prove to be very beneficial for you.
Bottom Line
The benefits of determining your home's value don’t start or end when it’s time for you to sell. Your insurance premiums, annual property taxes, refinancing options, and even applying for a home equity line of credit are all based on your home’s value.
