Empowering Your Financial Future: Leveraging Equity When You Sell Your House

One of the benefits of being a homeowner is that you build equity over time. By selling your house, that equity can be used toward purchasing your next home. But before you can put it to use, you should understand exactly what equity is and how it grows. Bankrate explains it like this:

“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

If you’ve owned your home for a while, you’ve likely built up some equity – and you may not even realize how much. Based on data from the U.S. Census Bureau and ATTOM, the majority of Americans have a substantial amount of equity right now (see graph below):

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.”

Building home equity is one of the major benefits of homeownership. As you make mortgage payments over time, the outstanding balance on your loan decreases, and your equity grows. Additionally, any increase in the market value of your property contributes to the growth of your equity. This growing equity serves as a valuable asset that can provide financial stability and open up opportunities when you're ready to make your next move.

When you decide to sell your current home, the accumulated equity becomes accessible to you. The proceeds from the sale can be used to cover the down payment and closing costs on your next home purchase. This financial cushion can make the transition to a new property more manageable and reduce the burden of securing a new mortgage.

Having a substantial amount of equity can also provide you with more flexibility and negotiating power in the homebuying process. A larger down payment can lead to better mortgage terms, potentially lower interest rates, and lower monthly payments. It can also make you a more attractive buyer to sellers, especially in competitive markets where multiple offers are common.

Furthermore, utilizing your home equity to move up to a larger or more desirable home can enhance your living situation and meet changing needs. Whether it's accommodating a growing family, upgrading to a more convenient location, or enjoying additional amenities, having built-up equity can make these moves more feasible.

In conclusion, building home equity not only offers financial stability during homeownership but also sets you up for a more favorable homebuying experience in the future. As you accumulate equity over time, you'll have the potential to leverage it wisely when it comes time to sell and make your next home purchase.

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