A homeowner I spoke with recently was surprised to learn about the equity in her home. She had never really thought about it as an investment and was amazed to discover how much she would be able to utilize moving forward for her next move.
Home equity is the amount of ownership you have in your home minus monies owed on your mortgage. It can be utilized for moves, renovations, large purchases or for other needs. Your home may be doing far more for you than you think. Read on to discover how to get the most out of your home equity including options available as well as why you need to understand your own situation.
How Can Your Home Equity Help You Buy Your Next Home?
Home equity can help a homeowner buy a new place because it provides funds, which can be invested into the new property. Such information as your home’s value, mortgage debt, and the goals you have in mind will determine the size of your potential equity. Knowing more about your potential equity can help you in making the right decision.
Home equity is an essential component for lots of homeowners. It is usually the driving force behind their decision-making. Equity has the ability to allow homeowners to purchase a new house with a higher down payment and consequently less money owed. The biggest mistake I see homeowners making is that they do not consider their current equity position when determining their plans. This is especially important today, as data shows the average U.S. homeowner with a mortgage has approximately $299,000 in accumulated home equity, representing a significant financial resource that many homeowners may not fully understand.
They can be overwhelmed by concerns about interest rates or the housing market and forget to calculate their goals. Before taking any action, it is essential that you have a firm grasp on things like your home’s value, your mortgage balance, your objectives, and the timing of your move. With that knowledge, you can evaluate whether selling your home now and buying another or waiting is the best option for you.
Can Home Equity Help You Improve the Home You Already Own?
Yes, many homeowners are looking to use equity to fund smart home improvements that suit their needs and improve their quality of life. Projects can range from renovations to additions, allowing you to create a more enjoyable environment for your family while also helping to improve the value of your home.
Another client of mine was not ready to move, but she was frustrated that her home no longer met her family’s needs. Her kitchen needed remodeling, and the floor plan was outdated for her current family lifestyle. Rather than looking for another home to buy, we worked together to see if making some improvements to her home would resolve some of her issues.
It was very important for her to understand her equity position in order to be certain that the home was a good investment for her future needs. Not all home improvements have an equal ROI, and only you can decide what changes are best for your home, your neighborhood and your future.
Can Home Equity Provide More Financial Flexibility?
It depends, but home equity can give homeowners more options for big expenses, future needs, or unexpected events. Home equity, cash flow, and goals should all be considered when determining whether it’s a good idea to tap into that equity.
For some, being able to build home equity has opened their eyes to opportunities they didn’t know they had. In fact, homeowners collectively hold nearly $35 trillion in residential real estate equity, showing why understanding this resource can be an important part of long-term financial planning. It can serve as a financial gateway to whatever their next step in life, whether that be physically relocating or upgrading their current home, amongst other things. In the same vein, accessing home equity is an important decision that should be made thoughtfully, as there are many factors to take into consideration such as the impact on the mortgage and how it fits within one’s financial picture overall.
Making Your Home Equity Work for Your Future
Your home is more than just a place to live. Over time, it can become one of your most valuable financial resources. The first step in that process is knowing where you are and how it fits into where you want to go.
If you are curious about how much equity you have built and what options it may create, a conversation about your current home value can help you make a more informed decision. Whether you are planning a move now or simply preparing for the future, my goal is to help you feel supported through every step of the process — The Most Supported Move You’ll Make.