Leveraging Los Angeles and Beverly Hills Home Equity: Your Path to Affordability
Leveraging Los Angeles and Beverly Hills Home Equity: Your Path to Affordability | Christophe Choo at Coldwell Banker Global Luxury is Your Local Real Estate Expert.
Are you contemplating selling your house in Los Angeles or Beverly Hills, CA? If so, today's mortgage rates may be making you wonder if that's the right decision, given the high-cost living in these desirable areas. Some homeowners are reluctant to sell and take on a higher mortgage rate on their next home. However, if you're worried about this too, it's essential to consider that even though rates are high right now, so is home equity, especially in prime locations like Los Angeles and Beverly Hills. Here's what you need to know.
Bankrate explains precisely what equity is and how it grows:
"Home equity is the portion of your home that you've paid off and own outright. It's the difference between what the home is worth and how much is still owed on your mortgage. As your home's value increases over the long term and you pay down the principal on the mortgage, your equity stake grows."
In other words, equity is the current value of your Los Angeles or Beverly Hills home, minus what you still owe on your home loan.
How Much Equity Do Homeowners in Los Angeles and Beverly Hills Have Now? Recently, equity in these upscale neighborhoods has been growing faster than you might think. To help contextualize just how much the average homeowner has, CoreLogic says:
". . . the average U.S. homeowner now has about $290,000 in equity."
In prime real estate markets like Los Angeles and Beverly Hills, home prices have soared in recent years, significantly boosting homeowners' equity. While the market has started to normalize, these prestigious areas continue to attract buyers at a remarkable pace, causing home prices to rise once again.
According to the Federal Housing Finance Agency (FHFA), the Census, and ATTOM, a property data provider, nearly two-thirds (68.7%) of homeowners in Los Angeles and Beverly Hills have either fully paid off their mortgages or have at least 50% equity (see chart below):
That means nearly 70% of homeowners in these sought-after locations have a tremendous amount of equity right now.
How Equity Helps with Your Affordability Concerns in Los Angeles and Beverly Hills: With today's affordability challenges, your equity can make a big difference when you decide to move within Los Angeles or Beverly Hills. After you sell your house, you can use the equity you've built up in your home to help you buy your next one. Here's how:
Be an all-cash buyer: If you've been living in your current home in Los Angeles or Beverly Hills for a long time, you might have enough equity to buy a new house in these high-end areas without having to take out a loan. If that's the case, you won't need to borrow any money or worry about mortgage rates. The National Association of Realtors (NAR) states:
"These all-cash home buyers are happily avoiding the higher mortgage interest rates . . ."
Make a larger down payment: Your equity could be used toward your next down payment within Los Angeles or Beverly Hills. It might even be enough to let you put a larger amount down, so you won't have to borrow as much money, making today's rates less of a sticking point. Experian explains:
"Increasing your down payment lowers your principal loan amount and, consequently, your loan-to-value ratio, which could lead to a lower interest rate offer from your lender."
Bottom Line for Los Angeles and Beverly Hills Homeowners: If you're thinking about moving within the prime real estate markets of Los Angeles or Beverly Hills, the equity you've built up can make a big difference, especially today. To find out how much equity you've got in your current house and how you can use it for your next home in these exclusive neighborhoods, let's connect. Your dream home may be more attainable than you think, thanks to your valuable home equity.