Understanding Home Equity: Why It Matters When Selling Your Property

Home equity is often referred to as your home’s hidden wealth, a powerful financial tool that many homeowners may not fully appreciate until it’s time to sell. In this blog, we’ll explore what home equity is, how much it has increased over the past five years, and how you can leverage it to purchase your next home. Understanding these concepts is crucial for making informed decisions in today’s real estate market.

What is Home Equity?
Home equity represents the portion of your home that you truly own. It’s the difference between your home’s current market value and the remaining balance on your mortgage. For instance, if your home is worth $400,000 and you owe $250,000 on your mortgage, your equity is $150,000. “Home equity is one of the most significant financial assets for homeowners. It grows as you pay down your mortgage and as your home’s value appreciates,” notes Money.com in their 2024 report. This growth in equity can be a game-changer when it’s time to sell your property, offering you substantial funds to use toward your next investment.

How Much Has Equity Increased in the Past 5 Years?
The past five years have been exceptional for home equity growth. According to the National Association of Realtors (NAR), the median price of existing homes in the U.S. has risen by nearly 40% from 2019 to 2024. This increase means that many homeowners have seen a significant boost in their equity. A recent article by Homelight highlights that "the average homeowner gained over $60,000 in equity in just the last year alone." This surge is largely due to the strong housing market, driven by low interest rates and high demand for homes. Even as the market stabilizes, the equity gains from the past few years remain a valuable asset for homeowners.

How to Use Your Equity to Purchase Another Home
Leveraging your home equity when buying your next property is one of the smartest moves you can make. The equity you’ve built up can be used as a substantial down payment, reducing the amount you need to borrow for your new home. This not only lowers your monthly mortgage payments but also puts you in a stronger position as a buyer.

According to Ramsey Solutions, "using the equity from your current home can help you avoid PMI (private mortgage insurance) and secure better loan terms." This can be particularly advantageous if you’re moving to a more expensive area or upgrading to a larger home.

There are several ways to access your equity, including selling your home outright or using a home equity line of credit (HELOC). However, selling your home often provides the most significant financial advantage, especially if you’ve seen substantial equity growth.

Bottom Line:
Selling your home and unlocking its equity is a major financial decision, one that requires expert guidance. At The Vince Caropreso Team, we have over 65 years of combined experience in real estate, helping over 1,600 homeowners like you make the most of their property sales.

Our team is here to ensure you get top dollar for your home, while also providing strategies to use your equity effectively when purchasing your next property. Contact The Vince Caropreso Team today to schedule a strategy session and take the first step toward your next home.