Real Estate Consider This: Home Equity

June 8, 2021



If you are a homeowner or a potential homeowner, this tip is for you…

First a definition of home equity:

          Home equity is the difference between what you owe on your mortgage and what your home is    

          currently worth.  Home equity increases in two ways:   

                           1st way:  as you pay your mortgage, home equity rises 

                            2nd way:  the value of your home on the market goes up–rises.

OK, so as a homeowner it is easy to see what this is important to know and understand but why is it important for first time home buyers?    Because last year in 2020, 52% of Americans who bought their first home said they got help from friends and/or family.    The number one lender:  Their parents.

Or perhaps the parents want to invest in their children’s education… It’s been a long-standing tradition in this country for many households to help pay college expenses for their children.

Here again, some have tapped into the equity in their homes to do that.   It’s a safe assumption that a percentage of that down payment money and/or the education investment came from home equity their parents had accumulated due to both mortgage payments and appreciation of their property in the market.

Savings in any form is a good thing. The forced savings you can earn from making a mortgage payment enables you to build wealth through home equity. That equity can come in handy in both good and more challenging times.

Rising prices mean homes are also gaining value, which drives an increase in the equity you have in your home. In the latest

“In the second quarter of 2020, the average homeowner gained approximately $9,800 in equity.”

This year-over-year growth in equity gives you the ability to put that money toward a down payment on your next home or to keep it as extra savings.

Wondering what your home value is?    The supply of homes for sale is way down–very low inventory.   Prices are increasing nationally.    Have a real estate agent or realtor find out what your property might be worth.