Robbinsville, new jersey

Name: Team Sharif Sells
Address: 17 Main Street Suite 402, Robbinsville, NJ, 08691, US
Telephone: (609) 757-9647

Home » Our Latest Blog » Real Estate in Robbinsville, NJ » How Home Equity Can Mitigate Affordability Challenges

How Home Equity Can Mitigate Affordability Challenges

Contemplating the sale of your home? The current mortgage rates might be causing you to question if it’s the right time. Some homeowners are hesitant to sell due to concerns about potentially securing a higher mortgage rate on their next property. If this is a worry for you as well, it’s essential to understand that while rates are currently elevated, so is the value of your home equity. Here’s what you should keep in mind.

How Home Equity Can Mitigate Affordability Challenges

“Equity in your home represents the share of your property that you’ve fully paid off and now own outright. It’s the disparity between your home’s current market value and the remaining balance on your mortgage. As your home appreciates in value over time and you reduce the principal on your mortgage, your ownership stake, or equity, expands.”

In simpler terms, equity is the current value of your home minus your outstanding mortgage balance.

What Is the Current Homeowner Equity Level?

Notably, homeowner equity has been increasing at a pace that may surpass your expectations. To provide some perspective on the average homeowner’s equity position, CoreLogic reports:

“The typical American homeowner now boasts approximately $290,000 in home equity.”

This remarkable increase in equity is attributable to substantial home price gains over the past few years, which accelerated the accumulation of homeowners’ equity. While the housing market has begun to stabilize, the demand for homes continues to outstrip supply, leading to renewed price appreciation.

As reported by the Federal Housing Finance Agency (FHFA), the Census, and ATTOM, a property data provider, a substantial majority – approximately 68.7% – of homeowners have achieved a noteworthy financial milestone. They have either completely paid off their mortgages or possess a minimum of 50% equity in their homes, as illustrated in the chart below:

This indicates that nearly 70% of homeowners currently hold a substantial equity stake in their homes.

What Is the Current Homeowner Equity Level?

In the current landscape of affordability challenges, your accumulated home equity can be a game-changer when it comes to your relocation plans. When you sell your current home, the equity you’ve built up becomes a valuable asset that can assist you in purchasing your next one. Here’s how it can work for you:

1. Become an All-Cash Buyer:
If you’ve resided in your current home for an extended period, your equity may be substantial enough to allow you to buy a new house without requiring a mortgage. This means you won’t need to take out a loan or be concerned about mortgage rates. The National Association of Realtors (NAR) highlights the advantages:

“These all-cash home buyers are happily avoiding the higher mortgage interest rates . . .”

2. Increase Your Down Payment:
You can use your equity to boost your down payment for your next home. This larger down payment may even enable you to put down a more substantial sum, reducing the amount you need to borrow. As a result, today’s mortgage rates may have less impact on your financial decisions. Experian elaborates on the benefits:

“Increasing your down payment lowers your principal loan amount and, consequently, your loan-to-value ratio, which could lead to a lower interest rate offer from your lender.”

Bottom Line

If you’re contemplating a move, the equity you’ve accumulated can be a significant asset, particularly in today’s market. To determine your current home’s equity and explore how it can facilitate your transition to a new home, let’s get in touch.