Understanding Home Equity and Its Role in Your Next Move

Considering selling your home? One significant concern you might be grappling with is the current mortgage rates. While it's natural to hesitate about moving into a higher rate with your next home, it's essential to remember the high equity landscape of today's housing market. Here’s an in-depth look.

Demystifying Home Equity

To put it simply, equity represents the portion of your home that you truly own. As explained by Bankrate:

“Home equity reflects the section of your home you've fully paid off, distinguishing between your home's current worth and the outstanding amount on your mortgage. It’s the consequence of increasing property values over time paired with the gradual reduction of your loan's principal.” In essence, equity is the difference between your home's present value and the remaining amount on your home loan.

Current Home Equity Landscape

Recent times have seen a surge in equity growth for many homeowners. As highlighted by CoreLogic:

“The average homeowner in the U.S. now boasts an equity of around $290,000.” This surge is primarily due to a significant rise in home prices in the past years. Even though the market is beginning to find its equilibrium, the demand for homes still exceeds available listings. This sustained demand continues to push home prices upwards.

Recent data from agencies like the Federal Housing Finance Agency (FHFA), the Census, and ATTOM suggests that almost 69% of homeowners either own their homes outright or possess at least 50% equity.

The Power of Equity in Addressing Affordability

In today's market, where affordability is a concern for many, equity stands as a potent tool for homeowners. Here’s how it can be instrumental when you decide to move:

• Buying with Cash: If you've spent a significant time in your current home, your accumulated equity might be substantial enough to purchase a new house outright. This way, you circumvent the need for a loan and the accompanying interest rates. As noted by the National Association of Realtors (NAR): “All-cash home buyers are strategically evading higher mortgage interest rates...”

• Opting for a Larger Down Payment: You can channel the equity from your current home towards the down payment for your next. This might even enable you to make a heftier down payment, reducing the amount you need to borrow. As Experian states: “Boosting your down payment can reduce the principal loan amount, potentially fetching you a more favorable interest rate from your lender.”

Bottom Line

If you're on the fence about making a move, remember the power of the equity you've accumulated over the years. It could be a game-changer in today's market conditions. To gain clarity on your equity position and strategize its optimal use for your subsequent purchase, let’s engage and chart a clear path forward.

9-22-2023