Maximizing Your Home Equity: A Strategic Guide

Homeownership is not just about owning property—it's about building wealth through home equity. Whether you're considering selling, buying, or leveraging your equity for financial opportunities, understanding its potential is crucial. Here’s why assessing your home equity today could be the key to achieving your financial goals.

What Is Equity?

Think of equity as a simple math equation. Freddie Mac explains:

“. . . your home’s equity is the difference between how much your home is worth and how much you owe on your mortgage.”

Your equity grows as you pay down your loan over time and as home prices climb. Thanks to the rapid home price appreciation we saw in recent years, you probably have a whole lot more of it than you realize.

The latest from the Census and ATTOM shows more than two out of three homeowners have either completely paid off their mortgages or have at least 50% equity.

That means the majority of homeowners have a game-changing amount of equity right now.

1. Understanding Your Financial Strength

Your home equity is the difference between your home's current market value and the outstanding balance on your mortgage. As you continue to pay down your mortgage and as home values increase, your equity grows. This accumulated equity represents a significant financial asset.

According to Bankrate, recent years have seen substantial increases in home values, meaning your equity may have grown more than you realize. This increased equity provides you with more financial leverage and options.

2. Leveraging Your Equity for Your Next Move

If you're contemplating a move, your home equity can play a pivotal role. With the average U.S. homeowner holding over $300,000 in equity (CoreLogic), you have substantial financial resources at your disposal. Two-thirds of homeowners either have fully paid off their mortgages or possess at least 50% equity, highlighting the wealth tied up in residential properties.

After selling your home, you can use this equity in various ways:

• Become an All-Cash Buyer: If your equity is sufficient, you can purchase your next home outright without needing a mortgage. This can streamline the buying process and give you a competitive edge in a tight housing market.
• Increase Your Down Payment: Alternatively, you can use your equity to make a larger down payment on your next home. A larger down payment not only reduces the amount you need to finance but also improves your chances of securing favorable loan terms and lower interest rates.

3. Assessing Your Equity: The First Step

To determine how much equity you have and how best to utilize it, consider obtaining a Professional Equity Assessment Report (PEAR) from a trusted real estate agent. This report provides a clear snapshot of your home's current value and the equity you've accrued, empowering you to make informed financial decisions.

4. Market Dynamics and Strategic Timing

Current market conditions, such as low inventory and high buyer demand, favor sellers. Selling now can ensure your home stands out before potential competition increases. Partnering with an experienced real estate agent can optimize your home's listing visibility and appeal to prospective buyers.

5. Economic Considerations and Your Decision

Despite broader economic uncertainties, historical data indicates that presidential election years typically have minimal and temporary impacts on the housing market. This resilience underscores the long-term stability of real estate as an investment.

How Your Equity Can Help Fuel Your Move

After you sell your house, that equity can help you move without worrying as much about today’s mortgage rates. As Danielle Hale, Chief Economist for Realtor.com says: “A consideration today's homeowners should review is what their home equity picture looks like. With the typical home listing price up 40% from just five years ago, many home sellers are sitting on a healthy equity cushion. This means they are likely to walk away from a home sale with proceeds that they can use to offset the amount of borrowing needed for their next home purchase.”

The First Step: Determine How Much Equity You Have in Your Home

Want to find out how much equity you have? To do that, you’ll need two things:

1. The current mortgage balance on your home
2. The current value of your home

You can probably find the mortgage balance on your monthly mortgage statement.

To understand the current market value of your house, you can pay hundreds of dollars for an appraisal, or you can contact a local real estate agent who will be able to present to you, at no charge, a professional equity assessment report (PEAR).

With home prices continuing to reach new highs, owners are also seeing their equity approach the historic peaks of 2023, close to a total of $305,000 per owner. Importantly, higher prices have also lifted some 190,000 homeowners out of negative equity, leaving only about 1.8% of those with mortgages underwater.

Your equity grows as you pay down your home loan and as home prices increase. With home prices rising again, your equity is getting an extra boost. Almost half of homeowners are equity rich because they have at least 50% equity in their homes. If you’ve been in your home for a while, you might have gained a considerable amount of equity, too. Want to find out how much equity you have? DM me for a Professional Equity Assessment Report (PEAR).

Conclusion: Seizing Your Financial Future

Owning a home not only provides shelter but also serves as a cornerstone for building wealth and financial security. By understanding and leveraging your home equity wisely, you can capitalize on current market opportunities and pave the way for future financial success.

Whether you’re looking to sell, buy, or invest, your home equity is a valuable asset that can support your goals. Contact me today for a Professional Equity Assessment Report (PEAR) and let's explore how you can maximize your home equity to achieve your financial aspirations.