Ways Your Home Equity Can Help You Reach Your Goals
If you’ve owned your house for at least a couple of years, there’s something you’re going to want to know more about – and that’s home equity.
If you’re not familiar with that term, Freddie Mac defines it like this:
“. . . your home’s equity is the difference between how much your home is worth and how much you owe on your mortgage.”
That means your equity grows as you pay down your home loan over time and as home values climb. While it’s true home prices dipped slightly last year, they rebounded and have been climbing in many areas since then. Here’s why that price growth is good news for you.
In the latest Equity Insights Report, Selma Hepp, Chief Economist at CoreLogic, explains:
“With price gains continuing to help homeowners build wealth, equity has reached a new high and regained losses that resulted from declines last year. And while the average U.S. homeowner gained over $20,000 in additional equity compared with the third quarter of 2022, some markets are seeing larger increases as price growth catches up.”
And that figure is just for the last year. To help you really understand how that number can add up over time, the report also says the average homeowner with a mortgage has more than $300,000 in equity. That much equity can have a big impact.
Here are a few examples of how you can put your home equity to work for you.
Buy a Home That Fits Your Needs:
- Moving to a larger home makes sense if your current space is no longer sufficient for your needs.
- Downsizing can be beneficial if you have too much space and want a more manageable property.
- Using equity for a down payment on a new home aligns with your changing lifestyle.
Reinvest in Your Current Home:
- If you're not ready to move, using home equity to improve your existing property is a wise decision.
- Consider projects that offer long-term benefits and increase your home's value.
- Consult with a real estate agent for guidance on prioritizing upgrades for maximum return on investment.
Pursue Personal Ambitions:
- Home equity can be a valuable resource to pursue personal aspirations.
- Responsible use of equity for meaningful purposes like starting a business, funding education, or preparing for retirement can positively impact your life.
Understand Your Options to Avoid Foreclosure:
- In challenging financial situations, having a clear understanding of your options is crucial.
- Home equity can act as a financial cushion, providing a buffer if you're struggling to make mortgage payments on time.
- It's essential to explore alternative solutions and potentially tap into your equity to avoid foreclosure.
Leveraging home equity requires careful consideration and planning. Whether it's for improving your living situation, investing in personal goals, or managing financial difficulties, understanding the potential uses of home equity can help you make informed decisions that align with your current and future needs. If you want to know how much equity you have in your home, connect with a local real estate agent. They can do a professional equity assessment report on how much you’ve built up over time and talk you through how you can use it to help you reach your goals