Equity is the difference between the current market value of your home and any outstanding mortgage debt, if any. As you pay down your mortgage, the amount of equity you have grows. You can also increase your equity by making improvements to your home, such as adding a new room, remodeling the kitchen, or replacing the roof.
When you decide to sell your home, any equity you have in the property is yours to use as you see fit. You can use it to purchase a new home, make a down payment on an investment property, or even use it as a source of cash.
No matter how you decide to use your equity, it‘s important to understand how it works. Equity is a valuable asset that can give you financial freedom, but it‘s important to be smart with it.
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.”
Over time, your home equity grows. In addition to providing financial stability while you own your house, when you’re ready to sell it, that money could go a long way toward paying for your next home.
By selling your house and leveraging your equity, it can be easier to pay for your next home. Let’s connect today so you can find out how much home equity you have and start planning your next move.