Are you grappling with the decision to sell your home? While the housing market's affordability is showing signs of improvement this year, the financial aspect may still weigh heavily on your mind. However, delving into the concept of home equity might just provide the clarity you need to make a confident decision. As outlined in a recent article from Bankrate:
"Home equity represents the gap between your home's current value and the outstanding balance on your mortgage. Essentially, it signifies the portion of your home that you fully own.
Initially, you establish a certain level of equity with your down payment upon purchasing the home, and this equity grows as you steadily pay down your mortgage. Moreover, as your home's value appreciates over time, your equity naturally increases."
In simple terms, equity can be calculated as the current value of your home minus your outstanding mortgage balance. Surprisingly, your equity may have experienced substantial growth in recent years, thanks to the surge in home prices.
Given the current state of affairs, homeowners are sitting on a considerable amount of equity. CoreLogic reports that the average homeowner in the United States still holds over $300,000 in equity, showcasing the significant financial resource at their disposal.
Additionally, data from the Census and ATTOM indicates that approximately two-thirds of homeowners either own their homes outright or possess at least 50% equity.
This implies that around 70% of homeowners are in a strong equity position, presenting an opportune moment to leverage this asset when considering a move. Here's how you can make the most of your home equity:
1. Become an All-Cash Buyer: If you've been in your current home for an extended period, you might have accumulated enough equity to purchase your next home outright, eliminating the need for a mortgage. This can give you a competitive edge in a tight housing market and potentially save you money on mortgage interest.
2. Increase Your Down Payment: Utilize your equity to bolster your down payment for your next home purchase. A larger down payment not only reduces the amount you need to borrow but also improves your chances of securing better interest rates from lenders, thereby lowering your long-term borrowing costs.
To ascertain the extent of your home equity, consider reaching out to a trusted real estate agent for a Professional Equity Assessment Report (PEAR).
In conclusion, if you're contemplating a move, tapping into your home equity can be a game-changing financial strategy. Consult with a local real estate professional to determine your equity position and explore how it can facilitate your next home purchase.