Are you hesitating about putting your house on the market? While affordability is showing signs of improvement this year, the housing market remains competitive. This might leave you feeling uncertain. However, delving into the concept of home equity could provide the clarity you need to make a decision.
Home equity is essentially the disparity between your home’s current value and the outstanding balance on your mortgage. It signifies the portion of your home that you truly own.
Your journey with equity begins with the initial down payment when you purchase your home. As you continue to pay down your mortgage, you gradually accumulate more equity. Additionally, as your property appreciates over time, your equity grows alongside it. Essentially, equity boils down to a straightforward equation: your home’s present value minus your outstanding mortgage balance. And the good news? Your equity has likely increased more than you realize, especially given the recent surge in home prices.
With a substantial amount of equity at your disposal, if you’re contemplating a move, your home equity can be an invaluable asset. It’s worth noting that a significant majority of homeowners—roughly over two-thirds—either have fully paid off their mortgages or possess at least 50% equity in their homes, highlighting the substantial equity pool available to many homeowners right now.
Once you’ve sold your house, you can leverage your equity to facilitate your next home purchase. Here are a couple of avenues you can explore:
- Become an all-cash buyer: If you’ve been rooted in your current home for an extended period, chances are you’ve amassed enough equity to purchase your next home outright without the need for a mortgage. This approach not only eliminates the hassle of borrowing but can also give you an edge in competitive housing markets or enable you to save on mortgage interest payments, potentially making your offer more enticing to sellers.
- Increase your down payment: Your accumulated equity can also serve as a substantial portion of your next down payment. In fact, it might even afford you the opportunity to make a larger down payment, thereby reducing the amount you need to borrow. Lenders often reward borrowers with lower interest rates for larger down payments, as they perceive less risk due to the borrower’s increased equity in the property.
Considering a move? Your home equity could be the key to unlocking your next chapter. Let’s connect to assess your equity position and explore how it can facilitate your transition to a new home.
