Given the surge in home values over recent years, properly understanding the benefits of home equity for both content homeowners and prospective sellers could be more important than ever.
First, what is home equity?
Good question. The definition is straightforward and simple. Home equity is the difference between the value of your home and what you still owe on it when it comes to your mortgage. That’s why it’s become such a hot topic lately. When home values spiked, people suddenly owned much more equity in their homes. Other ways to build home equity are fairly obvious and include making mortgage payments and adding value through a renovation project.
Home equity offers several notable benefits for homeowners. It can help provide a financial cushion and flexibility through home equity loans, cash-out refinances, or a home equity line of credit, often referred to as a HELOC.
But understanding this topic is just as important when you’re getting ready to sell your home. Here are two reasons.
More potential for profit
As home values rise, sellers with substantial home equity stand to make considerable profits. The difference between your selling price and your remaining mortgage balance can be even more substantial than you thought it would be.
Provides you with greater buying power
Of course, if you make more money than you would’ve before, that gives you more money to spend for a larger down payment. This is why it’s important to understand the current market, when you’re buying and selling, and where a good Realtor and loan officer can really help out. (If you need some recommendations, the Pride Settlement team has you covered.)
Owning a home has multiple financial and life benefits, and our team takes joy in helping each one of our buyers and sellers start new chapters. When it comes down to it, each home is an investment and could be a vehicle to help you secure a better future in more ways than one. Reach out to us with any questions on this topic – or anything else title and closing related. We’re always glad to help our Pride!