Thinking of selling your home this year? Understanding the pwoer of our home equity make be the key to making your decision.
Bankrate defines equity as:
“Home equity is the difference between your home’s value and the amount you still owe on your mortgage. It represents the paid-off portion of your home.
You’ll start off with a certain level of equity when you make your down payment to buy the home, then continue to build equity as you pay down your mortgage. You’ll also build equity over time as your home’s value increases.”
Think of equity as a simple math equation. It’s the value of your home now minus what you owe on your mortgage. And guess what? Recently, your equity has probably grown more than you think.
In the past few years, prices have skyrocketed, which means your home’s value – and your equity – likely shot up, too. So, you may have more equity than you realize.
How To Make the Most of Your Home Equity Right Now
If you’re thinking about moving, the equity you have in your home could be a big help. CoreLogic says:
“. . . the average U.S. homeowner with a mortgage still has more than $300,000 in equity . . .”
Clearly, homeowners have a lot of equity right now. And the latest data shows over two-thirds of homeowners have either completely paid off their mortgages or have at least 50% equity.
That means roughly 70% have a tremendous amount of equity right now.
Here’s how to leverage the equity in your current home:
- Be an all-cash buyer: If you’ve been living in your current home for a long time, you might have enough equity to buy your next home without having to take out a loan. If that’s the case, you won’t need to borrow any money.
“You may want to pay cash for your home if you’re shopping in a competitive housing market, or if you’d like to save money on mortgage interest. It could help you close a deal and beat out other buyers.”
-Homerate
- Make a larger down payment: Your equity could also be used toward your next down payment. It might even be enough to let you put a larger amount down, so you won’t have to borrow as much money. Borrowers who put down a larger percentage of the total home price generally get better interest rates.
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