Cuyahoga county recently completed a county-wide reassessment of property values, reflecting an increase in home values across most communities. Some parts of Lakewood showed a 42% increase from 2018, and the county found a 16% increase countywide (Cleveland.com). While many homeowners may dread the prospect of increased taxes, some even fearing that they may need to move, most financial experts agree that increased home values are a positive sign.
We talked to Sean Hadley, Branch Manager with Cross Country Mortgage, to understand the larger implications of the county-wide reassessment and what it means for Ohio homeowners.
Increased Home Values Lead to Higher Equity
“With the increase in home values, equity is created,” Hadley explains. Equity, or the difference between a home’s value and the outstanding mortgage, increases as a homeowner pays down their mortgage or a home’s value improves. While increased equity in a home benefits homeowners in many ways, increased home values also mean higher taxes, which could mean a higher monthly payment for borrowers who choose to escrow their taxes and insurance.
Hadley explains, “Because lenders escrow taxes based on the most recent tax bill, borrowers may feel a double hit to the escrow increase, first to cover the shortage in the account for the taxes under collected, and then the increase to cover the higher tax amount moving forward.” Homeowners can save themselves financial setbacks by reserving extra money each month to cover unexpected bills. For homeowners who may need to adjust their finances or even reconsider their living situation in light of increased home values, Hadley outlines several options.
Higher Home Valuations Justify Higher Sale Prices
For those looking to sell a home, the increased property value will help support a higher asking price. According to Josh Young, listing specialist with The Young Team, “We’ve seen unprecedented sales prices across NE Ohio the past year or so which has led to increased property valuations. Despite the negative implications increased property values have on the amount of taxes you’re paying, if you are looking to sell your home in the near future it can be tremendously beneficial.
Potential buyers have access to more information than ever before, including appraised property tax value, the Zestimate, and ePropertyWatch. When these numbers increase, they help justify a higher sales price for the house.”
To receive monthly updates on your own home’s values, click here.
Lower Monthly Payments
Refinancing is also an option for homeowners who are not ready to move. As interest rates remain as low as 2.5%, homeowners may be able to refinance a home with a lower interest rate to achieve a lower monthly payment. Hadley explains, “Consumers can tap into the equity and pull funds out with a second mortgage or by refinancing.”
However, while it may be tempting to cash out on higher equity to fund a vacation, financial planners generally recommend allocating these funds toward a savvy investment or a home improvement project instead.
Cancel the PMI
Additionally, homeowners who are currently paying private mortgage insurance may be able to eliminate that added expense. Once the principal balance on a mortgage falls below 80% of the value of a home, most lenders do not require private mortgage insurance. While you can eliminate PMI through refinancing, you can also submit a request in writing to your lender to stop paying PMI without refinancing. To qualify, you’ll need to ensure that the principal value of your mortgage is below 80% of your home’s market value, you have a good payment history, and show evidence of your home’s value, such as a recent appraisal.
What to do if You Question the Valuation
Lastly, if you are concerned that the county valued your home incorrectly, there are steps you can take to appeal the home value. The National Taxpayers Union estimates that up to 60% of properties may be valued higher than their actual value, and some alterations can actually decrease a home’s value. Removing a feature, like a deck, pool, or outbuilding, can decrease a property’s value.
To appeal your property’s assessment, contact your local assessors office and set up an appointment. You can find the appropriate paperwork online, and Ohio allows residents until March 31 to appeal a property tax assessment.
Learn more about refinancing with Cross Country Mortgage.