If you’re a homeowner, you might be torn over whether or not to sell your home right now; in fact, this is one of the most frequent conversations we are having! Maybe that’s because you don’t want to take on a higher mortgage rate on your next home. If that’s your biggest hurdle, understanding your equity may be exactly what you need to help you feel more comfortable making your decision moving forward!
What Equity Is and How It Works
Equity is the current value of your home minus what you owe on the loan. And recently, that equity has been growing far faster than you may expect. Over the last few years, home prices rose dramatically, and that gave your equity a big boost very quickly. While the market has started to normalize, there’s still an imbalance between the number of homes available for sale and the number of buyers looking to make a purchase. And it’s because homes are in such high demand that prices are back on the rise today. Rob Barber, CEO of ATTOM, a property data provider, explains:
“Equity levels were high even during the recent downturn, and now they are going back up and better than ever.”
How Equity Benefits You in Today’s Market
With today’s affordability challenges, that equity can be a game changer when you move. Here’s why. Based on data from ATTOM and the Census, nearly two-thirds (68.7%) of homeowners have either paid off their mortgages or have at least 50% equity (see chart below):
That means roughly 70% have a tremendous amount of equity right now.
Once you sell your house you can use your equity to help with your next purchase. It could be some (if not all) of what you’ll need for your next down payment. By leveraging your equity, you may have the opportunity to secure this larger down payment on your next property, potentially reducing your overall loan amount and mitigating the impact of increased rates. And, if you’ve been in your current house for years, you may have even built up enough equity to pay in all cash, avoiding borrowing altogether. Additionally, utilizing your equity strategically may help in qualifying for favorable lending terms, contributing to a more cost effective mortgage arrangement.
If you’re planning to make a move, the equity you’ve gained can make a big impact. To find out just how much equity you have in your current home and how you can use it to fuel your next purchase, we would love to connect and get the conversation started!
Sources: keeping current matters, attomdata, Census