Homeowners can use the equity in their home to help them purchase a new property. To do this, one must first understand exactly how equity works and how it grows. Equity is essentially an increase in the value of a property due to changes in market conditions or improvements to the residence. Bankrate describes equity as such: “Equity is the difference between what you owe on your mortgage loan and what your home is currently worth.” As times pass and values change, so too does the amount of equity associated with any given home; making it available for homeowners to access.
Home equity is the portion of your home you’ve paid off- in other words, your stake in the property as opposed to the lender’s. In practical terms, home equity is the appraised value of your home minus any outstanding mortgage and loan balances.
Majority of Americans Have a Large Amount of Equity
The U.S. Census Bureau and ATTOM have both collected data showing that the majority of homeowners in America currently possess a substantial amount of equity in their houses (see graph below). If you’ve been owing your home for some time, it’s likely that you also have built up a significant amount of equity – but may not even be aware of it.
And having such large amounts of equity is a benefit to homeowners in more ways than one. Rick Sharga, Executive Vice President of Market Intelligence at ATTOM, explains:
Record levels of home equity provide security for millions of families, and minimize the chance of another housing market crash like the one we saw in 2008.
As the value of your home increases, so too will your equity. Not only can this provide you with financial security while living in your current residence, but it also acts as a nest egg which could be used toward buying your next home when the time comes.
What We Say…
By selling your house and leveraging your equity, it can be easier to pay for your next home. Let’s connect today so you can find out how much home equity you have and start planning your next move.
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