Understanding equity when trying to sell.
If you’re thinking about selling your home, you may wonder how much money you’ll have left after the sale. For most people, they still have a mortgage to pay off when thinking of selling their property. If you do sell with a mortgage, you want to do it wisely. How much equity should you aim to have? Here’s what you need to know.
Home equity is the amount of the home you own, free and clear. If you have a $200,000 home and a mortgage balance of $150,000, you have $50,000 in equity. As you pay your mortgage over time, you build equity. You can also gain equity if your home’s value increases. Basically, equity helps you have cash in your pocket after you pay off your mortgage and cover your selling costs. It’s what’s left that you can use to put a down payment on a new home or use for other purposes.
The ideal amount of equity to have before you sell your home depends on your goals. If you’re downsizing, you might not need as much cash for a down payment on your new home as you would if you were getting a larger home.
At a minimum, you want to have enough equity to cover the mortgage, sales costs, and to get yourself ready for life in your new location. This could include moving costs, a down payment or first month’s rent. Once you arrange that, any extra cash becomes money you can spend on other goals. You may put the extra cash towards a larger down payment or even use it to renovate your new home.
When you are looking to purchase a home, make sure you enlist the help of Andraya Coulter to find the best home loan to fit your needs and your budget. I assist California and Texas with all their home loan needs. Contact me to get started today!