If you own a home, you may have a substantial amount of equity. That equity can be a useful tool when you are ready to sell your current house and buy your next one.
The starting point is understanding what you have. Before deciding how equity might support a move, get a clearer picture of your home’s value, what you owe, and how those figures connect to your goals.
Whether you need more room or want a smaller place, the same question matters: How much of your next purchase could the equity in your current home help cover?
What Is Home Equity?
Home equity is the difference between your home’s market value and the amount you owe on your mortgage. In plain English, take what your home is worth and subtract what you still owe. The difference is your equity.
The National Association of Realtors explains how homeowners build that value over time:
“Housing wealth (home equity or net worth) gains are built up through price appreciation and by paying off the mortgage.”
There are two parts to that explanation. Your equity can grow as your home’s value increases. It also grows as you pay down your mortgage.
That is why understanding equity takes more than looking at home prices alone. You also need to look at your remaining mortgage balance. Together, those figures give you a clearer starting point for planning your next move.
You May Have More Equity Than You Expect
Even when home prices moderate, many homeowners can still have a significant amount of equity. A softer price does not, by itself, tell you how much equity remains in a particular home.
The sources cited in the original article illustrate that point. A Realtor.com survey found that many homeowners estimated they had built up substantial equity.
CoreLogic also reported that, despite equity gains contracting because of home price declines in some regions, U.S. homeowners still held considerable equity on average. In that historical report, CoreLogic Chief Economist Selma Hepp put average homeowner equity at about $270,000, nearly $90,000 above the report’s earlier comparison point.
Those figures describe the findings of that report, not a current estimate of your home’s equity. The useful takeaway is the distinction between a broad housing trend and your own position.
Your move should begin with an estimate for your property, not an assumption based on an average. You may be surprised by what you have, but the next step is to work through your own numbers.
Connect Your Equity to the Move You Want to Make
Equity becomes more useful when you connect it to a specific goal. Instead of stopping at “How much do I have?” ask, “How could it help me buy the home I need next?”
If You Need More Space
If your current home no longer gives you the space you need, you may be considering a larger house. The equity you have built could help support that purchase when you sell.
Start by identifying what is missing from your current home. Then discuss how the equity from a sale might fit into the purchase of a home that better meets those needs.
If You Want Less Space
You may have the opposite problem: more house than you need. If a smaller home makes more sense, your equity can also be part of that plan.
The goal is not simply to move because you have equity. It is to understand how that equity could help you move into a home that fits your situation better.
If the Down Payment Is Your Main Question
Your equity may provide some, or potentially all, of what you need for the down payment on your next home.
That possibility is worth exploring before assuming a move is out of reach. Rather than guessing, ask for help estimating your equity and discussing how the proceeds from a sale could support your next purchase.
How a Skilled Real Estate Agent Can Help
A trusted real estate agent can help you better understand your home’s value. That gives you a more useful foundation for estimating your equity and planning a sale.
Bankrate explains the connection between pricing your home and preparing for your next purchase:
“Hiring a skilled real estate agent can give you a realistic estimate of home prices in your area and how to price your current home. Using that figure, you can calculate how much equity you have and what your net proceeds will look like, so you can apply that money toward the down payment and closing costs of your new home.”
This makes the pricing conversation about more than choosing a listing number. It is also an opportunity to understand what selling could mean for your buying plans.
An agent can help you navigate the often-complicated selling process and work toward a smoother transaction. That support does not remove every uncertainty, but it gives you someone to help you work through the process.
A Practical Way to Start Planning
You do not need to answer every question at once. Organize the conversation around these steps:
- Clarify your goal. Decide whether you need more space, less space, or simply a home that better fits your needs.
- Review what you owe. Have your remaining mortgage balance ready for the equity discussion.
- Discuss your home’s value. Ask a skilled agent for a realistic estimate and guidance on pricing.
- Connect the sale to the purchase. Review estimated equity and net proceeds, then discuss how that money could go toward your next down payment and closing costs.
Put Your Equity in Perspective
Many homeowners have substantial equity, and you may be one of them. Understanding yours can help you make more informed decisions about selling and buying.
Start with your mortgage balance and a conversation about your home’s estimated value. Then reach out to Ed Parcaut to discuss how your equity could fit into the financing plan for your next home.
