If youre a homeowner, you might be torn on whether or not to sell your house right now. Maybe thats because you dont want to take on a higher mortgage rate on your next home. If thats your biggest hurdle, understanding your equity may be exactly what you need to help you feel more comfortable making your move.
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, theres still an imbalance between the number of homes available for sale and the number of buyers looking to make a purchase. And its 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 Todays Market
With todays affordability challenges, that equity can be a game changer when you move. Heres 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 youll need for your next down payment. It may even be enough to allow you to put a considerably larger down payment on your next home, so you dont have to finance quite as much. And, if youve been in your current house for years, you may have even built up enough equity to pay in all cash. If thats true for you, youd be able to avoid borrowing altogether, so you wouldnt have to worry about todays mortgage rates.
How To Find Out How Much Equity You Have
The best way to learn how much you have is to reach out to a trusted real estate agent for a Professional Equity Assessment Report (PEAR).
Bottom Line
If youre planning to make a move, the equity youve 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, connect with a trusted real estate advisor.
