Many homeowners looking to sell are currently feeling caught in the middle: current mortgage rates are higher than current interest rates on homes, further discouraging them from selling and moving. You may be in the same situation.
But what if there was a way to offset these high borrowing costs? There is. And the money you need probably already exists as equity in your current home.
What is Equity?
Think of stocks as a simple mathematical equation. Freddie Mac explains it like this:
“…Your home equity is the difference between the value of your home and the remaining balance of your mortgage.”
Over time, as you pay off your loan and home prices rise, your property value increases, and with the rapid increase in home prices in recent years, your property is probably worth a lot more than you realize.
According to the latest Census and ATTOM survey, more than two in three homeowners have paid off their mortgage (shown in green in the graph below) or have at least 50% equity in their home (shown in blue in the graph below).
This means that the vast majority of homeowners now have a groundbreaking amount of equity.
How your assets can fuel your relocation
After selling your home, the equity you have will allow you to move without worrying too much about current mortgage rates, says Daniel Hale, chief economist at Realtor.com.
“One thing today's homeowners should consider is what their home equity situation is. The typical asking price for a home is 40% higher than it was just five years ago, and many home sellers have a lot of equity available, which means they're likely able to use the proceeds from their home sale to borrow against their next home purchase.”
Here are some ways you can leverage your equity when buying your next home, to name a few.
Buy with all cash: If you've lived in your current home for a long time, you may have enough equity to buy your next home without taking out a mortgage. In that case, you won't have to borrow money or worry about mortgage interest rates. Save up a large down payment: You can also use your equity to help with your next down payment. You may also have enough equity to save up a large down payment. That way, you won't have to borrow as much at current interest rates. First step: Determine how much equity you have in your home
Want to know how much you're worth? You need two things:
Your current mortgage balance on your home Your current value on your home
You can probably find your mortgage balance on your monthly mortgage statement. To find out the current market value of your home, you can either pay a few hundred dollars for an appraisal or contact a local real estate agent who can provide you with a free Professional Equity Appraisal Report (PEAR).
By getting in touch with a trusted local agent and doing the math, you can be one step closer to making a move you never thought was realistic – all thanks to your assets.
Conclusion
Call us to find out how much equity you have and discuss in more detail how it could enable your next move.
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