Make the Most of Your Home Equity
If you’re contemplating selling your house, understanding your home equity could be the key to making your decision easier. While affordability is improving this year, it remains tight, and that may be on your mind. But tapping into your home equity can provide significant benefits. An article from Bankrate explains:
“Home equity is the difference between your home’s value and the amount you still owe on your mortgage. It represents the paid-off portion of your home.
You’ll start with a certain level of equity when you make your down payment to buy the home, then continue to build equity as you pay down your mortgage. You’ll also build equity over time as your home’s value increases.”
Think of equity as a simple math equation: the current value of your home minus what you owe on your mortgage. Recently, your equity has probably grown more than you realize.
In recent years, home prices have skyrocketed, which means your home’s value—and your equity—likely increased significantly. You may have more equity than you realize.
How to Make the Most of Your Home Equity Right Now
If you’re thinking about moving, the equity you have in your home could be a big help. According to CoreLogic:
“. . . the average U.S. homeowner with a mortgage still has more than $300,000 in equity . . .”
Clearly, homeowners have a lot of equity right now. The latest data from the Census and ATTOM shows over two-thirds of homeowners have either completely paid off their mortgages or have at least 50% equity.
After selling your house, you can use your equity to help buy your next home. Here’s how:
Be an all-cash buyer: If you’ve lived in your current home for a long time, you might have enough equity to buy your next home without needing a loan. If that’s the case, you won’t need to borrow any money or worry about mortgage rates. Investopedia states:
“You may want to pay cash for your home if you’re shopping in a competitive housing market, or if you’d like to save money on mortgage interest. It could help you close a deal and beat out other buyers.”
Make a larger down payment: Your equity could also be used toward your next down payment. It might even be enough to let you put down a larger amount, so you won’t have to borrow as much money. The Mortgage Reports explains:
“Borrowers who put down more money typically receive better interest rates from lenders. This is because a larger down payment lowers the lender’s risk since the borrower has more equity in the home from the beginning.”
The Easy Way to Find Out How Much Equity You Have
To find out how much equity you have in your home, ask a real estate agent you trust for a Professional Equity Assessment Report (PEAR).
Planning a Move?
Your home equity can really help you out. Connect with a local real estate agent to see how much equity you have and how it can assist with your next home purchase.