Many homeowners considering selling may find themselves in a tough spot currently. The current mortgage rates are higher than the ones they are currently locked into for their homes, posing a challenge when it comes to deciding to sell and relocate. If this situation sounds familiar to you, know that you're not alone in facing this dilemma.

One way to counterbalance those rising borrowing costs is by leveraging the equity in your current home. In most cases, your existing property is a valuable asset that could provide the financial resources needed to navigate through higher borrowing expenses.

What Is Equity?

Equity is like a basic math problem. According to Freddie Mac:

““. . . your home’s equity is the difference between how much your home is worth and how much you owe on your mortgage.”
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— Freddie Mac

Your equity increases as you make payments on your loan and as property values rise. Due to the significant home price appreciation in recent years, you likely have accumulated more equity than you might be aware of.

According to the most recent data from the Census and ATTOM, over two-thirds of homeowners have either fully paid off their mortgages (green in the chart) or possess at least 50% equity (blue

That means most homeowners currently have a significant amount of equity that could make a big difference.

How Your Equity Can Help Fuel Your Move

After selling your house, the equity you receive can assist you in moving without feeling as concerned about current mortgage rates, as pointed out by Danielle Hale, Chief Economist at Realtor.com.

““A consideration today’s homeowners should review is what their home equity picture looks like. With the typical home listing price up 40% from just five years ago, many home sellers are sitting on a healthy equity cushion. This means they are likely to walk away from a home sale with proceeds that they can use to offset the amount of borrowing needed for their next home purchase.”
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— Danielle Hale, Chief Economist for Realtor.com

Here are some examples of how you can utilize equity to purchase your next home:

Be an all-cash buyer: If you've spent a considerable amount of time in your current residence, there's a chance you've built up enough equity to make a move to your next home without the need for a loan. In this scenario, you can proceed without borrowing money or being concerned about mortgage rates.
Make a larger down payment: Your equity might be utilized for your upcoming down payment. This could potentially enable you to increase the down payment amount, reducing the need to borrow as much at the current rates.

The First Step: Determine How Much Equity You Have in Your Home

To determine your current equity, you will need:

The current balance remaining on your home loan.
The present worth of your home.

You can likely locate your mortgage balance on your monthly mortgage statement. To determine your home's current market value, you have the option to shell out a few hundred bucks for an appraisal, or you can reach out to a nearby real estate agent who can provide you with a complimentary professional equity assessment report (PEAR).

Once you've engaged with a reliable local agent and crunched the numbers, you're a step nearer to pursuing a transition that might have seemed out of reach - all made possible by your equity.