When we talk about home ownership, the focus is often just about having a place to call home, to literally house you and your family, which makes sense!   But the flip side to owning a property is the financial value it provides as an investment.   And that is where the magic word — EQUITY enters the conversation.  Home equity is defined as the value of your house minus the amount you owe on your mortgage or home loan.   As you would with any sizable investment in your portfolio, you monitor its growth and look for ways to maximize how that asset can best be utilized.   Nationwide trends show home pric

es growing in the double digits annually.  Here in my local market of Pierce County, last year we saw a 17% increase in home prices, that means more equity in your pocket!  But the choice of how to put that equity to work remains yours as a homeowner.  Are you ready to sell, stay or dream big to capitalize on that burgeoning asset?!  Let’s dive into those options and see what magic that home equity can make.

Sell

You’ve probably heard the word on the street, we’re experiencing a sellers’ market.  Sellers have the upper hand as the demand greatly outweighs the supply.  In fact, within my local market, we are consistently showing an average 285% chance of selling across all price

points.  Meaning on average about 3 buyers want to buy your home! The high demand and greater competition have lead to the remarkable home price increases.  And those rising prices mean more home equity for you to cash in!

Should I Sell My House? 6 Signs It’s Time | Real Estate News & Insights | realtor.com®

But how do you know? And what questions should you be asking yourself and what steps forward should you take?

How long? If you haven’t owned your home more than 2-5 years you made need to assess the amount of equity available when equated with the costs of selling your home.   The math for you may not add up.

Where to?  Its great to be a seller in the sellers’ market, but what moves can you make as a buyer and where do you plan to move up to.   Selling your home to cash in the equity to move up the property ladder is an appealing action to take.  But being prepared for what that means as a buyer is equally important.

Why?  This might be the easiest to answer if available home equity isn’t motivating your enthusiasm.  The typical life changes like new babies, retirement, job changes, divorce, etc. tend to get the conversation to sell rolling but sometimes, like this moment in time, the strength of the market itself is calling out to homeowners to sell.

If pondering these questions leads you to affirm that NOW is the time to sell. Here’s what comes next – reach out to your real estate professional (me!).   Together we’ll formulate your plan to successfully prepare, list, market and negotiate the way to your home sold for top dollar and all that equity in your pocket!

Stay

Nope! Not selling! Lots of homeowners play the what if we sold game, only to realize that’s not their best move. Whether motivated by money, circumstance, or plain old love for where they live, staying is the best choice right now.  But what about all that equity contained within your home, destined to just sit and wait until selling time?   Homeowners wanting to utilize their current home equity have a few great options.  To cash in when it IS selling time, your home needs show off its quality form.  One of the best uses of home equity is to pour it back in to your home!  Deferred maintenance, large projects like roof or HVAC replacement, remodeling kitchens and bathrooms or adding on additional living space all will give you great return on your investment.

To access your home equity piggy bank your main options are Cash out refinance, Home equity loans or HELOCs (Home equity line of credit).   The cash out refinance may be a good option if

your original mortgage loan held a higher interest rate.  However, at the current moment of writing this, that may not be as interest rates are rising higher than in the previous few years (but lower than the average rate in the history of mortgage interest rates FWIW!)

Technically, home equity loans and HELOCs are two sides of the same coin. The difference is in how the loans are structured and how the money is disbursed.

A home equity loan is an installment loan where you’ll receive a lump sum and repay it in equal monthly payments over a number of years.

With a HELOC, you receive a line of credit that you can borrow from as needed for a fixed period of time (known as the draw period). Once the draw period ends, you’ll enter the repayment period and pay back what you borrowed plus interest. HELOCs often have variable interest rates.

Homeowners Are Rushing to Get HELOCs—Maybe You Should, Too (realtor.com)

Dream BIG

What if your home is already updated and in peak condition? What if your financial health is boosted by your equity but not all your eggs are in that home equity basket? Perhaps you’ve owned your home for many years and watched patiently as the values have risen. Or you’ve made smart mortgage moves like refinancing to 15 year mortgage or diligently paid down your mortgage.  And now you’re sitting pretty on a sizable quantity of equity! Well dream big, friends!  While some financial experts may warn against removing equity for less safe investments as home prices are expected to remain strong despite inflation adjustment (see 2022 Home Price forecasts). But as they as say there’s no reward without any risk.  The equity opportunity may allow for creating a new business or buying a second property for recreation or as rental property.  Check this link, either on your own or with your partner to help you responsibly dream up your financial visions.

https://www.herwealth.com/blog/4-steps-build-financial-plan-vision-reality

With many factors to consider, some within your control, some from outside sources, your home’s equity is an asset to acknowledge and monitor diligently.   Whether you’re ready to sell, stay or dream big, you have an advocate ready to offer information and guidance along the way.