If you own a home, your net worth has probably gone up significantly over the past year. Home prices have been rising steadily, which means you’re building equity much faster than you might think. Let’s break down how this works and what it means for you.
What is Home Equity?
Equity is the difference between the current value of your home and the amount you still owe on your mortgage. As you pay down your mortgage, and as your home’s value increases, your equity grows.
Rising Home Prices
Over the past year, the housing market has been incredibly competitive. There have been more people wanting to buy homes than there are homes available for sale. This high demand and low supply have driven home prices up across the country. For homeowners, this rise in prices has directly translated into increasing equity.
How Much Equity Have You Earned over the Past 12 Months?
According to the latest Homeowner Equity Insights from CoreLogic, the average homeowner’s equity has grown by $28,000 in the last year alone【source: KCM.
This is a significant increase and highlights just how beneficial homeownership can be for building wealth.
Why This Matters
- Increased Net Worth: Your home is a major asset, and as its value increases, so does your net worth. This can provide financial stability and open up opportunities for future investments.
- Access to Home Equity: Increased equity can provide you with more financial flexibility. You might consider a home equity loan or line of credit to fund renovations, pay for education, or consolidate debt.
- Better Financial Position: More equity can mean better terms if you decide to refinance your mortgage. You could potentially lower your interest rate, reduce monthly payments, or change the loan term to suit your financial goals.
What Should You Do?
- Monitor Your Home’s Value: Keep an eye on real estate trends in your area to stay informed about your home’s value.
- Consider Refinancing: If your equity has increased significantly, it might be a good time to refinance your mortgage and take advantage of better terms.
- Plan for the Future: Think about how you might use your home equity to support your long-term financial goals. Whether it’s renovating your home, investing in education, or saving for retirement, increased equity can provide a valuable resource.
The past year has been a strong period for homeowners, with the average homeowner gaining $28,000 in equity. This growth highlights the benefits of homeownership and provides a solid foundation for building wealth. By staying informed and considering how to best use your increased equity, you can make the most of this positive trend in the housing market.
Source: Keeping Current Matters
