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Your Home Equity Can Offset Affordability Challenges

The decision to sell your home and move to a new one is never taken lightly. Today’s mortgage rates, which have been on the rise, might be making you think twice about making that move. It’s not uncommon for homeowners to be concerned about taking on a higher mortgage rate on their next property. However, it’s important to understand that while rates are indeed high, home equity is soaring as well. In this blog post, we’ll explore how your accumulated home equity can help you overcome affordability challenges and make your dream of a new home a reality.

The Mortgage Rate Dilemma

The recent surge in mortgage rates has understandably raised questions and concerns among homeowners contemplating a move. The prospect of securing a new mortgage with potentially higher interest rates can be daunting. However, it’s essential to remember that your home equity can play a pivotal role in this equation.

Unlocking the Power of Home Equity

Home equity represents the value of your property that you truly own. It’s the difference between your home’s current market value and the outstanding balance on your mortgage. Here’s how your home equity can be a game-changer in addressing affordability challenges:

  1. Larger Down Payment: When you decide to sell your current home, the proceeds from the sale, including your home equity, can be used to make a substantial down payment on your new home. A bigger down payment not only lowers your overall loan amount but can also help you secure a more favorable interest rate on your new mortgage.
  2. Lower Loan-to-Value Ratio (LTV): A higher down payment translates to a lower LTV ratio. Lenders often offer better terms to borrowers with lower LTV ratios, which can result in a reduced interest rate and more manageable monthly mortgage payments.
  3. Reduced Debt: If you have accumulated a significant amount of home equity, you may consider downsizing or purchasing a more affordable property. This can lead to a smaller mortgage even with the higher interest rates, making homeownership more affordable.
  4. Access to Financial Resources: Depending on your circumstances, you may have the option to tap into your home equity through methods like home equity lines of credit (HELOCs) or home equity loans. This can provide you with additional financial resources to cover various expenses related to your new home.

Connecting for Personalized Guidance

If you’re contemplating a move and wondering how your home equity can help you overcome the current affordability challenges posed by high mortgage rates, it’s advisable to seek professional guidance. Connect with a real estate expert who can provide insights into your local market conditions and advise you on how to leverage your home equity effectively.

According to the Federal Housing Finance Agency (FHFA), the Census, and ATTOM, a property data provider, nearly two-thirds (68.7%) of homeowners have either fully paid off their mortgages or have at least 50% equity (see chart above):

Conclusion

While high mortgage rates might give you pause when considering selling your home and buying a new one, don’t forget the significant asset you’ve built up: your home equity. It can be a potent financial tool to help you address affordability challenges in the face of rising interest rates. Your dream of a new home can still become a reality, and your current home’s equity can be the key to making it happen.

If you’re curious about how much equity you’ve accumulated in your current house and how you can use it to make your next move, reach out to a trusted real estate professional today. They can provide you with a personalized plan to turn your homeownership dreams into a reality.

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