Mortgage borrowing is expected to be huge in 2022. Though could refinancing your home or business property lead to an even higher property tax bill?
With some exceptions in NY, experts anticipate overall national real estate trends to continue, with fast rising prices, along with record mortgage borrowing in 2022.
It may be an attractive or even necessary time to refinance your property. Yet, there could be unexpected costs and side effects you may not expect.
Property Equity Reaching New Record Highs
One of the few upsides of recent rapid inflation has been a tremendous surge in property prices. In turn that means many property owners are equity rich. At least on paper. Your property may well be worth double or more what you purchased it for in 2019.
No one wants to lose that. The truth is that everything could come crashing down tomorrow, and all of that perceived wealth could vanish even faster than it appeared.
A cash out refinance on your property could enable you to withdraw that money, so that you don’t lose it.
You may also desperately need that extra cash to offset the extreme inflation and rising costs on everything else in your life. Or to make a down payment on another property somewhere else before they become out of reach.
It’s High Time To Remodel
Many property owners may desperately want to refinance and tap equity to remodel.
You may want to reconfigure your space for working at home, home school, quarantine suites, extended lockdowns, and accepting more packages. You may need to add more bedrooms and bathrooms to accommodate parents or adult children in a multigenerational living situation.
For business owners, you may need to reconfigure your commercial property for the new delivery world. Convert it to all backend work and shipping, enabling more production, and eliminating space for in person customers.
The Timing Is Right For Refinancing
Large amounts of equity mean it can be easier to refinance, with low LTVs. Interest rates are expected to go up quickly soon as well. Lending may get tougher with more defaults over the next year.
The Downsides
If remodeling and improving the value of property does not spike your taxes on its own, refinancing at a much higher value could certainly alert property appraisers and tax assessors to how much more your property is worth and how flush you may be to afford higher taxes.
Make sure you are factoring this potential impact and expense in. Be sure that you have already challenged your property tax assessment and bill, and have it as low as possible before considering any of these moves.