Many homeowners may be torn on whether to sell their properties now. Read on, if a major reluctance to selling is having to absorb a higher mortgage rate on your next home purchase. Understanding the equity in your existing home might make you feel more comfortable about making “The Move” to your next lifestyle.

YOUR HOME EQUITY 

Of course, equity is simply the current value of your home minus what you owe on its loans. For example, beyond your first mortgage, you might also have tapped all or a portion of your home-equity credit line, serving as a second mortgage. 

Over the last few years, home prices have risen dramatically, giving your home equity a big boost quickly.  While the market has started to normalize in most parts of the country, housing still remains scant in the Plymouth area. An imbalance still exists between the number of homes available for sale and the number of buyers seeking to purchase.  Because homes are in such high demand, prices continue to rise (although at a slower pace) despite higher mortgage rates. (Those low rates hovering at or near 3% may never be seen again in our lifetimes, so stop holding your breath.)    

HOW HOME EQUITY BENEFITS YOU IN TODAY’S MARKET

Over two-thirds (68.7%) of the nation’s homeowners have either paid off their mortgages or have at least 50% equity in their properties.  See the chart below from Keeping Current Matters:

This means that nearly 70% of homeowners can use their hefty home equity to help with their next purchase.  That equity may be enough to allow you to make a considerably large down payment on your next home, lowering your mortgage payment.  If you’ve been in your current house for years, you may have even built enough equity to pay cash for your next lifestyle, avoiding mortgage payments altogether. 

Or you may decide to put, say, 20% down, using the balance of your home equity to make other sound investments, adding to  your retirement accounts, or even purchasing a second home that you can rent out some weeks or months.  (Real estate proves to be the best investment over time, so having a second home may be a sound purchase.)         

If you remain concerned about today’s existing mortgage rates, you can refinance when, or if, rates come down, while you have the benefits of your new home over that period.  If rates continue to hover between 6.5 and 7 percent, remember you write off all that interest on your taxes – another real-estate perk. 

HOW MUCH HOME EQUITY DO YOU HAVE?

Beth Davis and I, Steve Feldman, would be happy to discuss your situation further.  617-417-3125 and SteveF@kw.com.