As a homeowner, there’s one asset that may have rapidly increased for you this year: your home equity. Home equity is not just a buzzword—it’s a powerful tool for building wealth and a cornerstone of homeownership. However, many homeowners are unaware of how much equity they have or how to leverage it to grow their net worth.
What Is Home Equity?
Home equity is the portion of your home that you truly own, calculated as the difference between your home’s current market value and the remaining balance on your mortgage.
For example:
- If your home is valued at $500,000 and your mortgage balance is $250,000, your equity is $250,000.
This represents the cash you could potentially access or benefit from if you sold your home.
Why Has Home Equity Increased?
According to CoreLogic’s Homeowner Equity Insights, U.S. homeowners with mortgages have seen their equity grow by an impressive 9.6% since 2023. This surge is largely due to rising home prices in recent years, making homeownership an even more valuable investment.
Why Is Home Equity Important?
Building equity has several financial advantages:
- A Source of Borrowing Power
Home equity can act as a financial safety net. With a home equity line of credit (HELOC), you can borrow against your equity for various purposes, such as home improvements, college tuition, or unexpected expenses. - Long-Term Wealth Creation
Real estate is one of the few investments that typically appreciates over time. As property values rise, so does your equity, helping you build wealth for the future. - Potential for Profit
When you sell your home, the equity you’ve built becomes a profit. These funds can be reinvested into a new property, used to pay off debt, or even invested elsewhere to further grow your net worth.
Making the Most of Your Home Equity
While home equity offers numerous benefits, it’s important to make informed decisions. Speak with a qualified lender and real estate professional to understand the pros and cons of accessing your equity.
Curious about how much equity you have? My team and I can provide a Comparative Market Analysis (CMA) to help you determine your home’s current value and equity position. This analysis also gives insight into the latest pricing trends in your area.