Are you a homeowner currently contemplating selling your house? Perhaps you are hesitant due to the uncertainty of the housing market. Well, what if I told you that understanding your equity may be exactly what you need to make your move? Yes, that’s right. Equity is an essential component to your real estate decisions, and here’s why.
Equity is the difference between the current value of your home and what you owe on it. It’s essentially the amount of money you would have left over once you pay off your mortgage. The great news is that, in recent years, home prices have been skyrocketing, which means that your equity is growing faster than ever before. Even with current market normalization, there is still such a high demand for homes that prices are continuing to rise. According to property data provider ATTOM’s CEO, Rob Barber, this trend is expected to continue for a while.
Having a significant amount of equity in your home allows you to have more financial leverage. It provides you with more options, such as using your equity to put down a larger down payment on your next home or even secure a better interest rate on your mortgage. Additionally, the more equity you have, the more flexibility you have when it comes to selling your home. This puts you in a better negotiating position, enabling you to hold out for more appealing offers.
What Equity Is and How It Works
Your home’s equity is equal to its current value less any outstanding loans. Additionally, more quickly than you might anticipate, that equity has been increasing recently.
Home prices have increased significantly over the past few years, which quickly increased your equity. Although the market has started to normalize, there is still an imbalance between the number of homes that are up for sale and the number of people looking to buy. The reason why prices are once again rising for homes is that they are so in demand. A provider of property data, Rob Barber is the CEO of ATTOM:
“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
Given the difficulties in finding affordable housing today, your equity may make all the difference when you move. Here is why. According to ATTOM and Census data, 68% of homeowners have either paid off their mortgages or have at least 50% equity (see chart below)
This indicates that a substantial portion—roughly 70%—of people currently own equity.
You can use the equity in your home after you sell it to finance your subsequent purchase. It might cover part of your next down payment, if not the entire amount. You might even be able to use it to buy your next home with a much larger down payment, reducing the amount of financing you need to do so. And if you’ve lived in your current home for a while, you might even have enough equity to make a full cash purchase. In that case, you wouldn’t need to worry about the current mortgage rates because you could avoid borrowing altogether.
Furthermore, understanding your equity can help you determine exactly how much money you will have available upon selling your current home. By calculating your equity, you can have a better idea of how much you can put down on your next home, and even how much you can offer to pay your real estate agent for their services.
Moreover, knowing your equity position can be a useful tool in your estate planning. You can leverage this information to plan for a move that not only fits your lifestyle but also your financial goals. By having control over your equity, you can make decisions that make sense for you and your family.
In summary, while you may be hesitant to sell your home at this time, understanding your equity position can help you make your move with confidence. With the housing market in such high demand, it’s a great time to take advantage of the growth in equity. With a solid understanding of how equity works and how it affects your financial goals, you can make a well-informed decision that fits your lifestyle and financial objectives.
