Have you ever considered just how much wealth you’ve built up just from owning your home? As your home value increases, so does your net worth. And, if you’ve lived in your house for a few years (or longer), you're likely to be sitting on a pile of equity — maybe even more than you realize.
What Is Home Equity?
Home equity is simply the difference between what your house is worth and the balance owed on your mortgage. As an example, say your house is worth $500,000 and your mortgage balance is $200,000, you have $300,000 in equity. It’s essentially the wealth you’ve gained through homeownership. Currently, homeowners across the United States are seeing record amounts of equity.
According to Intercontinental Exchange (ICE), the average homeowner with a mortgage balance has $319,000 in home equity.
Why Have Homeowners Gained So Much Equity?
The rise in home equity over the years can be credited to two main factors:
1. Significant Home Price Growth
In recent years, home prices have climbed dramatically. According to the Federal Housing Finance Agency (FHFA), over the past five years, home prices nationwide have risen by 57.4% (see map below):
This appreciation means your house is likely worth much more now than when you first bought it.
2. Longer Tenure in Homes
Recent data from the National Association of Realtors (NAR) shows owners are staying in their homes for a decade (see graph below):
This increased tenure means homeowners benefit even more from home values growing over time. That’s because the longer someone has lived in their house, the more that home’s value has grown, which directly increases equity.
And if you’re one of those people who’s been in their home for 10 years or more, know this – according to NAR:
“Over the past decade, the typical homeowner has accumulated $201,600 in wealth solely from price appreciation.”
What Are The Benefits of Having Home Equity?
How does this translate for you? It means that your house is likely your biggest financial asset — and this could bring about some exciting opportunities for your financial future. Let’s break it down.
- Moving to Your Next Home
Your home equity could help you cover the down payment for your next home. In some cases, it might even mean you can buy your next house all cash. This could give you a significant advantage versus other potential buyers.
- Financing Home Improvements
Have you thought about upgrades to your kitchen, adding a home office, or tackling other home improvement projects? Your home equity can provide the funds to make those improvements happen, increasing your home’s value and making it more enjoyable to live in too.
- Getting a Business Going
That dream about starting your own business could become a reality, and your equity could be the kickstart you need. Whether it’s for startup costs, equipment, or marketing, leveraging your home’s value can help bring your entrepreneurial goals to life.
Bottom Line
Whether you’re thinking about selling, upgrading, or simply want to understand your options, your home equity is a powerful resource. If you’re wondering how much equity you’ve built or how you can use it to meet your goals, let’s connect and explore the possibilities.