The Key to Affordability Lies Within Your Home - Learn How to Unlock It

Are you contemplating selling your house in San Joaquin County? The current mortgage rates might be causing some hesitation, making you wonder if it's the right time to move. Some homeowners are reluctant to sell their current homes and take on a higher mortgage rate for their next one. 

If this thought has crossed your mind, it is essential to remember that while mortgage rates may be elevated now, so is your home equity.

Understanding Home Equity

Before we dive into the potential of home equity, let's ensure we're on the same page about what it means. As Bankrate clarifies,

“Home equity is the portion of your home that you’ve paid off and own outright. It’s the difference between what the home is worth and how much is still owed on your mortgage. As your home’s value increases over the long term and you pay down the principal on the mortgage, your equity stake grows.”

In other words, equity is how much your home is worth minus what you still owe on your home loan.

How Much Equity Do Homeowners Have Now?

Recently, your equity has been growing faster than you might think. To help contextualize just how much the average homeowner has, CoreLogic says:

“. . . the average U.S. homeowner now has about $290,000 in equity.”

That’s because, over the past few years, home prices went up significantly – and those rising prices helped your equity to accumulate faster than usual. While the market has started to normalize, more people still want to buy homes than homes available for sale. This high demand is causing home prices to go up again.

According to the Federal Housing Finance Agency (FHFA), the Census, and ATTOM, nearly two-thirds (68.7%) of homeowners have either fully paid off their mortgages or have at least 50% equity. (See the chart below)

How Equity Helps with Affordability Concerns

With today’s affordability challenges, your equity can make a big difference when you decide to move. After you sell your house, you can use the equity you've built in your home to help you buy your next one. Here’s how:

You could be an all-cash buyer:

As the National Association of Realtors (NAR) states:

“These all-cash home buyers are happily avoiding the higher mortgage interest rates . . .”

Imagine this scenario: you've been living in your current home for an extended period, and the equity you've built up might be enough to purchase a new house without requiring a loan. This scenario eliminates the need to borrow money and negates any worries about fluctuating mortgage rates.

Make a larger down payment: 

Your equity could 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 so today’s rates become less of a sticking point. Experian explains:

“Increasing your down payment lowers your principal loan amount and, consequently, your loan-to-value ratio, which could lead to a lower interest rate offer from your lender.”

Conclusion: Leveraging Your Home Equity

In a housing market where affordability concerns are prevalent, your home equity can serve as a powerful tool to overcome these challenges. If you're thinking about moving, the equity you've built up can make a big difference, especially today. Let's connect to find out how much equity you've got in your current house and how you can use it for your next home.

Contact Our Real Estate Team Today!

Ready to explore the possibilities your home equity offers? Contact our real estate team now for expert advice and assistance in Finding Your Perfect Home in San Joaquin County. Let's turn your homeownership dreams into a reality!