Do you want to know something important, you probably don’t have a professional check for you as you should? Spoiler alert: it’s the value of your house.
Because here is reality. Your house is probably the biggest financial asset that you have. And if you have lived in it for a few years or more, chances are that the richness of wealth is built in the background – even if you have not monitored it.
You may be surprised by how much it has grown, even if the market has shifted in recent months.
What is equity?
That hidden wealth is called in your house equity. It is the difference between what your house is worth today and what you still owe your mortgage. Your equity grows over time as the housing values rise and as you make your monthly payments. Here is an example to help you really understand how math works.
Let’s say that your house is now worth $ 500,000, and you have $ 200,000 left to pay your loan. That means you have $ 300,000 in equity. And that is good in line with what the typical homeowner has now.
According to Cotality, The average homeowner with a mortgage has approx $ 302,000 in equity.
Why you probably have more than you think
Here are the two main reasons why homeowners like you currently have almost record amounts:
1. Substantial growth of house prices. According to at the Federal Housing Financing Office (FHFA), House prices have almost risen 54% rural Over the past five years (See the map below):
This means that your house is probably worth much more than when you first bought it, thanks to how many prices have risen over time. And if you are worried because you split up the prices or even come down to some markets, know that you have been to your house for a few years (or more), you probably have enough equity to sell and still come forward.
2. People live longer in their houses. Facts from the National Association of Realtors (Nar), shows that the average homeowner has been staying in their house for about 10 years now (See the graph below):
That is longer than before. And during that decade? You have built up equity by only making your mortgage payments and riding the wave of rising housing values. Because the financial side of the homeowner is about playing the long game, don’t worry about small ups and downs on the market here and there. And over time that means you win.
So if you are one of those people who has been home for a while, here is how much the price growth behind the scenes has helped you. According to to Nar:
“In the past decade, the typical homeowner has collected $ 201,600 in wealth, exclusively from price rating.”
What could you actually Doing With that equity?
Your equity is not just a number. It is a tool that you can use to unlock your next large move. Depending on your goals you could:
- Use it to buy your next house. Your equity can help you cover the deposit on your next house. In some cases this may even mean that you can buy your next house in all cashes.
- Renovate your current house to better fit your life. And if you are strategic about your projects, they can add even more value to your house if you sell later.
- Start the company that you have always dreamed of. Your equity can be exactly what you need for start -up costs, equipment, software or marketing. And that can help to increase your earning potential, so you get another financial boost.
Bottom Line
Chances are that your house is now worth a lot. If you are curious about the value of your house, connect with a local agent to perform the songs. That way you know what you work with and where you can go from here.
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