What is equity, you ask? It’s simply the amount you have left to pay on your mortgage subtracted from the market value of your home. The difference is your home equity. Easy math! WHEN TO SELL YOUR HOME You’ve got equity on your side.
How much equity should you have before you sell your house? At the very least, you want to have enough equity to pay off your current mortgage, plus enough left over to make a 20% down payment on your next home so you can avoid paying private mortgage insurance (PMI). If you can make enough profit to also cover closing costs, moving expenses, or a larger down payment, then that’s even better! You definitely don’t want to sell your home when you have negative equity, and breaking even on a home sale isn’t a whole lot better. If you’re in either situation, you shouldn’t sell your house unless you’re trying to avoid bankruptcy or foreclosure. It’ll improve your financial situation As long as selling your house won’t hurt your financial situation, you’re probably in a good spot to sell. But wouldn’t it be nice if selling your house actually improved your financial situation? For lots of folks, improving their financial situation is the entire reason they sell their house. A popular way to make that happen is downsizing. Imagine you own a larger home worth $485,000 and you have $200,000 worth of equity. If you downsized by selling that house and buying a smaller one for $300,000, you’d likely cut your monthly payment in half. You’d also be nearly $200,000 closer to paying off your home and being completely debt-free. Sounds exciting, huh?
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