For many people, upgrading their home has been a long-term goal, but recent market challenges may have led to hesitation. The uncertainty of housing prices, rising interest rates, and economic fluctuations often create doubts about when to make a significant financial move. But despite these challenges, now might actually be one of the best times to make that upgrade happen. Here’s why you should seriously consider moving forward with your home buying plans today.
You Have a Lot of Equity To Leverage
One of the most important factors in today’s real estate market is the amount of equity homeowners have built up over the years. Even with some fluctuations in the market, national home prices have generally been on the rise. As a result, homeowners are sitting on a wealth of equity that can be put to good use.
What is equity, and why is it important?
Equity is the difference between the current market value of your home and the amount you still owe on your mortgage. It’s essentially your ownership stake in the property. When you pay down your mortgage or when your property value increases, your equity grows.
Over the last several years, home prices have steadily appreciated, leading to significant gains in home equity. Selma Hepp, Chief Economist at CoreLogic, provides valuable insight into how much equity homeowners have accumulated:
“Persistent home price growth has continued to fuel home equity gains for existing homeowners who now average about $315,000 in equity and almost $129,000 more than at the onset of the pandemic.”
This statistic highlights the financial power that many homeowners currently possess. If you’ve been in your home for a few years, you’re likely sitting on a substantial amount of equity.
How Equity Can Help You Upgrade
So, how does this equity help you in upgrading to a bigger or better home? The equity in your current home can be used as a down payment on your next property. The larger your down payment, the less you’ll need to borrow, which helps keep your monthly mortgage payments manageable.
In addition, when you put more money down, you may qualify for better mortgage terms, such as lower interest rates, fewer fees, and no requirement for private mortgage insurance (PMI). This can save you a significant amount of money over the life of your loan, making the upgrade more affordable than you might think.
To understand how much equity you have in your home, consider reaching out to a real estate professional who can provide you with a professional equity assessment. This will give you a clear idea of how much you can leverage for your next home purchase.
Mortgage Rates Have Fallen, Boosting Your Purchasing Power
Another key reason why now is a great time to make your move is the recent trend in mortgage rates. After a period of rising rates, we’re seeing a downward trend that can be incredibly beneficial for buyers. Lower mortgage rates not only reduce your monthly payments but also enhance your purchasing power.
What is purchasing power, and why is it important?
Purchasing power refers to the amount of home you can afford to buy based on your budget and the current interest rates. When mortgage rates fall, the portion of your monthly payment dedicated to interest decreases. As a result, you can either save money on a home that was already within your budget or afford a more expensive home than you could when rates were higher.
Nadia Evangelou, Senior Economist and Director of Real Estate Research at the National Association of Realtors (NAR), explains:
“When mortgage rates fall, the interest portion of monthly payments decreases, which lowers the total payment. This makes it easier for more borrowers to qualify for mortgages that may have been unaffordable at higher rates.”
In simpler terms, lower rates make it more likely that you’ll qualify for a mortgage, and it may even allow you to consider homes that were previously out of reach. Whether you’re looking to upgrade to a larger home, one with more amenities, or a better location, lower mortgage rates increase your flexibility in the homebuying process.
Flexibility in the Housing Market
With more equity to leverage and lower mortgage rates, you have more options in the current housing market. The extra purchasing power provided by both factors means you can explore homes in areas or price ranges you may not have previously considered. You may find a home that offers more space, better features, or is located in your dream neighborhood.
Additionally, as more buyers re-enter the market due to these favorable conditions, housing demand may increase. This could lead to rising prices again, so now might be the ideal time to act before the competition heats up further. The current market conditions offer a window of opportunity that could help you get the home you want without breaking the bank.
Maximizing the Benefits: Work with a Real Estate Professional
Navigating the real estate market can be complex, especially when you’re upgrading to a new home while selling your current one. To make the most of your equity and take advantage of lower mortgage rates, it’s essential to work with a trusted real estate professional.
A qualified agent can help you with several critical tasks, including:
Assessing Your Equity: A real estate agent can help you determine how much equity you’ve built in your current home and how you can best leverage it for your next purchase.
Finding the Right Property: Whether you’re looking for more space, a better location, or specific features, an agent can help you identify homes that meet your needs and fit your budget.
Connecting You with Lenders: A real estate professional can recommend trusted lenders who can help you take advantage of the best mortgage rates and loan programs available today.
Negotiating the Best Deal: With expert knowledge of the market, a real estate agent can negotiate on your behalf, ensuring you get the best possible terms on your home purchase.
Bottom Line
If you’ve been thinking about upgrading your home but have been waiting for the right time, now may be the perfect moment to make that move. The combination of substantial equity, falling mortgage rates, and greater purchasing power puts you in an excellent position to find the home of your dreams.
Rather than waiting for market conditions to change, take advantage of the current opportunities to upgrade to a bigger, better home. With the help of a trusted real estate professional, you can navigate the process with confidence and make the most of this advantageous moment in the housing market. Don’t let uncertainty hold you back—your dream home may be closer than you think.