If you’re thinking about selling your home, the mortgage on your next house may be giving you pause. You may want to move, but you don’t want to take on a higher mortgage rate.
That concern deserves a closer look. So does the equity you’ve built in your current home.
Your equity may help cover your next down payment, reduce the amount you need to finance, or potentially allow you to buy without a mortgage. Before deciding that a move is out of reach, it helps to understand what you have and how you might use it.
What Is Home Equity?
Home equity is the current value of your home minus what you owe on the loan. That is the starting point for understanding how your current house could help you purchase another one.
Keep those two pieces separate: what the home is worth and what you still owe. Looking at only the home’s value doesn’t tell you your equity. Neither does looking at the mortgage balance by itself.
If you’ve been focused mainly on the mortgage rate you might get on your next home, this gives you another part of the picture. The rate matters to your decision, but so does how much you would need to borrow.
How Home Prices Have Helped Build Equity
The original article described a period when home prices rose dramatically, giving homeowners a large equity boost in a relatively short time. Equity had grown faster than some owners may have expected.
It also described a market beginning to normalize while an imbalance remained between the number of homes available for sale and the number of buyers looking to purchase. Strong demand was helping push prices upward again.
Rob Barber, CEO of property data provider ATTOM, described that period this way:
“Equity levels were high even during the recent downturn, and now they are going back up and better than ever.”
That statement describes the market conditions behind the original article, not a promise about what your home is worth. The useful takeaway is to investigate your own equity rather than assume you know how much you have.
What the Equity Data Showed
The ATTOM and Census data cited in the original article showed that 68.7% of homeowners had either paid off their mortgages or had at least 50% equity in their homes.
The article described that share as nearly two-thirds, or roughly 70%, of homeowners with a substantial amount of equity. Those figures refer to the same cited data, not separate findings or an updated market reading.
That broad picture explains why equity deserves attention when you’re considering a move. But it doesn’t answer the question that matters most to you: How much equity is in your particular home?
Use the data as a reason to ask that question, not as a substitute for getting an assessment of your property.
Three Ways Equity Could Help With Your Next Purchase
When affordability is a concern, the equity you’ve built can make a meaningful difference. Once you sell your house, you can use that equity to help with your next purchase.
1. Help Cover Your Down Payment
Your equity could provide some, or possibly all, of what you need for the down payment on your next home.
If the down payment is one of the reasons you’re hesitating to move, start here. Ask how the equity in your current house could contribute to that purchase rather than considering the next home in isolation.
The question is straightforward: How much of the down payment might your equity cover?
2. Make a Larger Down Payment and Borrow Less
You may have enough equity to make a considerably larger down payment than you expected. A larger down payment means you would not need to finance as much of the next purchase.
This is especially worth exploring if a higher mortgage rate is your main concern. Equity does not change the rate itself. The opportunity described here is to reduce how much you need to borrow.
Instead of stopping at, “I don’t want a higher rate,” ask, “How much would I need to finance after using my equity?” That keeps the conversation focused on the purchase you’re actually considering.
3. Potentially Purchase With Cash
If you’ve owned your current house for years, you may have built enough equity to pay for your next home entirely in cash.
If that is true for your situation, you could avoid borrowing altogether. Without a mortgage on that purchase, you would not need to worry about the mortgage rate for that home.
A cash purchase is a possibility to explore, not an outcome to assume. The original article presents it as an option for homeowners whose accumulated equity is enough to make it work.
How to Find Out How Much Equity You Have
The original article recommends reaching out to a trusted real estate agent for a Professional Equity Assessment Report, or PEAR, as the best way to learn how much equity you have.
Start that conversation before deciding what your equity can or cannot do. The goal is to move from a general impression to a clearer understanding of your own home.
Keep these questions handy:
- What is my home’s current value?
- How much do I still owe on the loan?
- How much equity does that leave?
- Could that equity help cover my next down payment?
- Could it allow me to borrow less or explore a cash purchase?
Look at Your Equity Before You Rule Out a Move
You don’t have to dismiss concerns about a higher mortgage rate. But you also don’t have to make your decision without considering the equity you’ve gained.
Your next step is to request an equity assessment from a trusted real estate agent. Then reach out to Ed Parcaut to discuss how that equity could fit into your next home purchase and what financing options may be worth exploring.
