As a homeowner, you might be grappling with the decision to sell your house, possibly due to concerns about higher mortgage rates on your next home. If this is your dilemma, understanding your equity could be the key to boosting your confidence in making that move.
What is Equity and How Does It Work?
Equity represents the current value of your home minus your outstanding loan balance. Recently, equity has been growing at an impressive pace, thanks to substantial increases in home prices over the past few years. Although the market is showing signs of stabilization, the demand for homes still outweighs the supply, driving prices upward. According to Rob Barber, CEO of ATTOM, a property data provider,
“Equity levels were high even during the recent downturn, and now they are going back up and better than ever.”
The Advantages of Equity in Today’s Market
In today’s challenging affordability landscape, your equity can be a game changer when it comes to moving. Here’s why: Based on data from ATTOM and the Census, approximately 68.7% of homeowners have either paid off their mortgages or have accumulated at least 50% equity (see chart below):
This means that roughly 70% of homeowners currently possess a substantial amount of equity.
Upon selling your house, you can tap into this equity to facilitate your next purchase. It could cover some, if not all, of your down payment requirements for your new home. In fact, it may be sufficient to enable you to make a significantly larger down payment, reducing the need for financing. If you’ve owned your current house for an extended period, you might have accumulated enough equity to make an all-cash purchase, eliminating the need to worry about today’s mortgage rates.
How to Determine Your Equity
The most effective way to ascertain your equity is to consult a reputable real estate agent for a Professional Equity Assessment Report (PEAR).
In Conclusion
If you’re contemplating a move, the equity you’ve built up can have a substantial impact. To determine the extent of your current home equity and explore how you can use it to fuel your next purchase, let’s get in touch.