Are you thinking aboutselling your house? If so, todaysmortgage ratesmay be making you wonder if thats the right decision. Some homeowners are reluctant to sell and take on a higher mortgage rate on their next home. If youre worried about this too, know that even though rates are high right now, so ishome equity. Heres what you need to know.

Bankrateexplainsexactly what equity is and how it grows:

Home equity is the portion of your home that youve paid off and own outright. Its the difference between what the home is worth and how much is still owed on your mortgage.As your homes 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 now, 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,CoreLogicsays:

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

Thats 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, there are still more people wanting tobuy homesthan there are homes availablefor sale. This high demand is causinghome pricesto go up again.

According to theFederal Housing Finance Agency(FHFA), theCensus, andATTOM, a property data provider, nearly two-thirds (68.7%) of homeowners have either fully paid off their mortgages or have at least 50% equity (see chart below):

That means nearly 70% of homeowners have a tremendous amount of equity right now.

How Equity Helps with Your Affordability Concerns

With todays affordability challenges, your equity can make a big difference when you decide to move. After yousell your house, you can use the equity youve built up in your home to help you buy your next one. Heres how:

• Be an all-cash buyer:If youve been living in your current home for a long time, you might have enough equity to buy a new house without having to take out a loan. If thats the case, you wont need to borrow any money or worry about mortgage rates. TheNational Association of Realtors(NAR)states:

These all-cash home buyers arehappily avoiding the higher mortgage interest rates. . .

• Make a larger down payment:Yourequitycould be used toward your next down payment. It might even be enough to let you put a larger amount down, so you wont have to borrow as much money so todays rates become less of a sticking point.Experianexplains:

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.

Bottom Line

If you're thinking aboutmoving, the equity you've built up can make a big difference, especially today. To find out how much equity you've got in your current house and how you can use it for your next home, call me, Marie McLaughlin 727-858-7569.

Source:https://www.keepingcurrentmatters.com/2023/09/19/your-home-equity-can-offset-affordability-challenges/