Home equity is your property’s market value minus the total amount on your mortgage loan. When you put a down payment on any property you’re planning to buy, you begin with having equity. Equity value will increase as you pay off your mortgage and your home’s value appreciates.
If you sell with a mortgage, you want to do it properly. How much equity should you have? Here’s what you need to know.
How Equity Affects the Home Sale
Home equity is the amount of the home you own, free and clear. If you have a $300,000 home and a mortgage balance of $2, 50,000, you have $50,000 in equity.
As you pay your mortgage over time, you build equity. If your home’s value increases, you gain equity. Home values have been increasing a great deal since the 2008 crash, so many homeowners are in a better position now.
How does equity impact your home sale?
Equity helps you to save money in your pocket after you pay off your mortgage and cover your selling costs. You can use the saved money to put a down payment on a new home or use it for other purposes.
Do you need to have equity to Sell a Home?
It’s not compulsory to have equity when you sell your home, but it will be a plus if you have. If you have no equity, you will have to pay off your mortgage if it doesn’t get paid by the sale price and cover the sales costs.
If you don’t have equity you will not have money after selling your home to buy a new one. Many homeowners wait to build up their equity before planning to sell their homes.
If you want to build more equity before selling your home, follow a few steps,
Pay Off Your Mortgage
The quickest way to build more equity is by paying off your mortgage loan. By doing this, you can reduce the overall outstanding balance that you owe.
Make Home Improvements
If you cannot pay your mortgage loan fast, then make improvements to your home to increase its value, thereby increasing equity. Updating the bathrooms, remodeling, upgrading appliances, or try any other improvements to instantly add home’s value.
Price appreciation happens over time. To know how much your home has appreciated over time, you can use this calculator.
Current market value – Outstanding mortgage balance = Home equity
Get Help from a Licensed Real Estate Agent
Hire a licensed professional to help you. A professional can help you in marketing, negotiations, and everything else to get your home sold for top dollar.
An estate agent can also help you know the market value of your home and determine how much equity you have. Getting an appraiser to value your home is a good option.