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One of the benefits of being a homeowner is that you build home equity over time. If you’re a homeowner, your net worth got a boost over the past few years thanks to rising home prices. And, today’s homeowners are sitting on significant equity, even as home price appreciation has eased recently.
By selling your house, that home 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.”
Here’s what it means for you, even as the market moderates.
Majority of Americans Have a Large Amount of Home 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. Because of the imbalance between how many homes were for sale and the number of homebuyers in the market over the past few years, home prices appreciated substantially.
In fact, the latest Homeowner Equity Insights report from CoreLogic finds the average homeowner’s equity has grown by $34,300 over the past year alone. And if you’ve been in your home longer than that, chances are you have even more equity than you realize.
While that’s the national number, if you want to know what happened in your area, look at the map below from the Federal Housing Finance Agency (FHFA). It shows on average how much home prices have risen over the past five years, which has been a major driver behind equity growth.
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.”
Why This Is So Important Right Now
While home equity helps increase your overall net worth, it can also help you achieve other goals, like buying your next home. Homeownership is a long game, and if you’re planning to make a move, the home equity you’ve gained over time can make a big impact.
When you sell your current house, the equity you’ve built up comes back to you in the sale, and it may be just what you need to cover a large portion – if not all – of the down payment on your next home.
So, if you’ve been holding off on selling, it may be time to find out how much equity you have and how it can help fuel your next move. Get in touch with one of our Mortgage Professionals today to find out how much equity you have and how that can help you move into your next home.