Are You Underestimating Your Home Equity?

Posted by Laine Smith on 9/30/15 11:23 AM

As the U.S. rate of negative home equity dropped in the second quarter of 2015 and home prices in 20 major U.S. cities rose 5 percent in July from July 2014, a new study found that mortgaged U.S. homeowners could be severely underestimating their home equity.

Are You Underestimating Your Home Equity

According to data from Fannie Mae's National Housing Survey, only 37 percent of mortgaged homeowners believed they had significant (at least 20%) equity in their homes. On the contrary, it was estimated that of those surveyed, at least 69 percent of those homeowners have 20+ percent equity in their homes.

Americans' Perceptions of Home Value

Twenty-five percent of Americans believe there was no growth in home values last year, according to Zillow's Housing Confidence Index. In 2014, national home values actually grew at a 4 percent rate and by double digits in more than 65 metros.

Why It Matters

A home is likely the biggest investment most Americans will make in their lifetime. Underestimating that asset's value may keep many U.S. homeowners from advancing financially with their home equity. According to Fannie Mae, homeowners who have a "negative perception gap" also likely underestimate:

  • Their ability to qualify for a new mortgage.
  • How large of a down payment they could make with their home equity.
  • Their opportunity of selling their current home and upsizing or downsizing.

These misconceptions could be keeping you from utilizing your home equity. If you've put off buying a home again because of perceived low equity, you could be severely underestimating your home's value.

If you're interested in entering the homebuying market again, contact one of our mortgage bankers and download our free Upsizing and Downsizing Guide for everything you need to know about loan options and making a repeat home purchase.Download: Upsizing/Downsizing Guide

Download: Refinancing Guide

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