Your Home Equity Can Offset Affordability Challenges

<article class="post-800712 post type-post status-publish format-standard has-post-thumbnail hentry" id="post-800712"><span class="entry-date">September 19, 2023</span><div class="entry-header center-block text-center"><h1 class="entry-title">Your Home Equity Can Offset Affordability Challenges</h1><div class="shareBlock"><div class="shareTitle">Share</div><div class="shareIcons"><a aria-label="Twitter Share Link" class="twitter solid display-inline-block" data-tracking="Post,Social Post Link Clicked,Twitter" href="http://twitter.com/share?text=Your+Home+Equity+Can+Offset+Affordability+Challenges&amp;url=https%3A%2F%2Fgilliggroup.com%2Fblog%2Fyour-home-equity-can-offset-affordability-challenges%2F" target="_blank"><span class="force-hidden">Twitter</span></a>
<div class="fb-share-button display-inline-block" data-href="https://gilliggroup.com/blog/your-home-equity-can-offset-affordability-challenges/" data-layout="" data-size=""><a class="facebook solid fb-xfbml-parse-ignore" data-tracking="Post,Social Post Link Clicked,Twitter" href="https://www.facebook.com/sharer/sharer.php?u=https%3A%2F%2Fgilliggroup.com%2Fblog%2Fyour-home-equity-can-offset-affordability-challenges%2F&amp;src=sdkpreparse" target="_blank"><span class="force-hidden">Facebook</span></a></div>
<a class="pinterest solid display-inline-block" count-layout="horizontal" href="https://pinterest.com/pin/create/link/?url=https%3A%2F%2Fgilliggroup.com%2Fblog%2Fyour-home-equity-can-offset-affordability-challenges%2F&amp;description=Your+Home+Equity+Can+Offset+Affordability+Challenges" target="_blank"><span class="force-hidden">Pinterest</span></a>
<a class="linkedin solid display-inline-block" href="https://www.linkedin.com/shareArticle?mini=true&amp;url=https://gilliggroup.com/blog/your-home-equity-can-offset-affordability-challenges/?shareSlug%3Dyour-home-equity-can-offset-affordability-challenges" target="_blank"><span class="force-hidden">LinkedIn</span></a>
<a class="email dashicons dashicons-email solid display-inline-block" href="mailto:?subject=From gilliggroup.com: Your Home Equity Can Offset Affordability Challenges&amp;body=Your Home Equity Can Offset Affordability Challenges%0D%0Dhttps://gilliggroup.com/blog/your-home-equity-can-offset-affordability-challenges/" target="_blank"><span class="force-hidden">Email</span></a>
</div></div><div class="post-tax post-category"><span></span><a href="../category/realtor-blog/index.html" rel="tag">Realtor Blog</a></div><div class="post-tax post-post_tag"></div></div><div class="entry-content"><div><img alt="Your Home Equity Can Offset Affordability Challenges Simplifying The Market" decoding="async" loading="lazy" src="https://media.agentaprd.com/sites/222/20230919-Your-Home-Equity-Can-Offset-Affordability-Challenges.webp" style="display: block; margin-bottom: 5px; clear: both; max-width: 100%;" width="358"/>
<p>Are you thinking about <a href="https://www.simplifyingthemarket.com/2023/08/29/why-you-may-still-want-to-sell-your-house-after-all/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">selling your house</a>? If so, today’s <a href="https://www.simplifyingthemarket.com/2023/09/06/mortgage-rates-past-present-and-possible-future/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">mortgage rates</a> may be making you wonder if that’s the right decision. Some homeowners are reluctant to sell and take on a higher mortgage rate on their next home. If you’re worried about this too, know that even though rates are high right now, so is <a href="https://www.simplifyingthemarket.com/2023/09/11/planning-to-retire-your-equity-can-help-you-make-a-move/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">home equity</a>. Here’s what you need to know.</p>
<p><em>Bankrate</em> <a href="https://www.bankrate.com/home-equity/reasons-to-use-home-equity/" rel="noopener noreferrer" target="_blank">explains</a> exactly what equity is and how it grows:</p>
<blockquote><p><em>“</em><strong><em>Home equity is the portion of your home that you’ve paid off and own outright. It’s the difference between what the home is worth and how much is still owed on your mortgage.</em></strong><em> As your home’s value increases over the long term and you pay down the principal on the mortgage, your equity stake grows.”</em></p></blockquote>
<p>In other words, <strong>equity is how much your home is worth now, minus what you still owe on your home loan</strong>.</p>
<h4><strong>How Much Equity Do Homeowners Have Now?</strong></h4>
<p>Recently, your equity has been growing faster than you might think. To help contextualize just how much the average homeowner has, <em>CoreLogic</em> <a href="https://www.corelogic.com/press-releases/home-equity-increases-winter-spring-reducing-underwater-properties-q2/" rel="noopener noreferrer" target="_blank">says</a>:</p>
<blockquote><p><em>“. . . the average U.S. homeowner now has about </em><strong><em>$290,000 in equity</em></strong><em>.”</em></p></blockquote>
<p>That’s because, over the past few years, home prices went up significantly – and those rising prices helped your equity to accumulate faster than usual. While the market has started to normalize, there are still more people wanting to <a href="https://www.simplifyingthemarket.com/2023/08/30/buyer-traffic-is-still-stronger-than-the-norm/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">buy homes</a> than there are homes available <a href="https://www.simplifyingthemarket.com/2023/09/14/why-is-housing-inventory-so-low/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">for sale</a>. This high demand is causing <a href="https://www.simplifyingthemarket.com/2023/09/12/what-experts-project-for-home-prices-over-the-next-5-years/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">home prices</a> to go up again.</p>
<p>According to the <a href="https://www.fhfa.gov/Media/Blog/Pages/Homeowners-Equity-Remains-High.aspx" rel="noopener noreferrer" target="_blank"><em>Federal Housing Finance Agency</em></a> (FHFA), the <a href="https://data.census.gov/cedsci/all?q=mortgage" rel="noopener noreferrer" target="_blank"><em>Census</em></a>, and <a href="https://www.attomdata.com/news/market-trends/home-sales-prices/attom-q2-2023-u-s-home-equity-and-underwater-report/" rel="noopener noreferrer" target="_blank"><em>ATTOM</em></a>, a property data provider, nearly two-thirds (68.7%) of homeowners have either fully paid off their mortgages or have at least 50% equity (<em>see chart below</em>):</p>
<p><a href="https://www.simplifyingthemarket.com/content/images/20230914/20230919-Americans-Sitting-On-Tremendous-Equity.png?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank"><img decoding="async" src="https://files.keepingcurrentmatters.com/content/images/20230914/20230919-Americans-Sitting-On-Tremendous-Equity.png"/></a></p>
<p><strong>That means nearly 70% of homeowners have a tremendous amount of equity right now. </strong></p>
<h4><strong>How Equity Helps with Your Affordability Concerns</strong></h4>
<p>With today’s affordability challenges, your equity can make a big difference when you decide to move. After you <a href="https://www.simplifyingthemarket.com/2023/09/13/should-baby-boomers-buy-or-rent-after-selling-their-houses/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">sell your house</a>, you can use the equity you’ve built up in your home to help you buy your next one. Here’s how:</p>
<ul>
<li><strong>Be an all-cash buyer:</strong> If you’ve been living in your current home for a long time, you might have enough equity to buy a new house without having to take out a loan. If that’s the case, you won’t need to borrow any money or worry about mortgage rates. The <em>National Association of Realtors</em> (NAR) <a href="https://www.nar.realtor/blogs/economists-outlook/cash-rules" rel="noopener noreferrer" target="_blank">states</a>:</li>
</ul>
<blockquote><p><em>“These all-cash home buyers are </em><strong><em>happily avoiding the higher mortgage interest rates</em></strong><em> . . .”</em></p></blockquote>
<ul>
<li><strong>Make a larger down payment:</strong> Your <a href="https://www.simplifyingthemarket.com/2023/09/01/homeowners-have-a-lot-of-equity-right-now-infographic/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">equity</a> could be used toward your next down payment. It might even be enough to let you put a larger amount down, so you won’t have to borrow as much money so today’s rates become less of a sticking point. <em>Experian</em> <a href="https://www.experian.com/blogs/ask-experian/does-your-down-payment-affects-your-mortgage/" rel="noopener noreferrer" target="_blank">explains</a>:</li>
</ul>
<blockquote><p><em>“Increasing your down payment lowers your principal loan amount and, consequently, your loan-to-value ratio, </em><strong><em>which could lead to a lower interest rate offer from your lender</em></strong><em>.”</em></p></blockquote>
<h3>Bottom Line</h3>
<p>If you’re thinking about <a href="https://www.simplifyingthemarket.com/2023/09/04/why-its-still-a-sellers-market-today/" rel="noopener noreferrer" target="_blank">moving</a>, the equity you’ve built up can make a big difference, especially today. To find out how much equity you’ve got in your current house and how you can use it for your next home, get in touch with a trusted real agent.</p>
</div>
</div></article>