How Selling Can Unlock Your Equity and Create Wealth
How Selling Can Release Your Equity and Create Wealth
Home equity represents one of the most significant sources of wealth for many homeowners. It’s discussed a lot among real estate agents, investors, and financial experts. Yet this wealth often remains locked away, inaccessible until you make a decisive move. Let's explore what home equity is and how selling your home can transform this paper value into a real financial opportunity.
What Is Home Equity?
Home equity is the difference between what your home is currently worth on the market and what you still owe on your mortgage. For example, if your home sold for $500,000 today and you have $250,000 remaining on your mortgage, you have $250,000 in equity.
Equity builds in two primary ways:
As you pay down your mortgage principal over time
As your property increases in value due to market appreciation
When you buy a house, the amount you put down as a downpayment affects your equity. The larger the downpayment, the more equity you immediately have. This is also why a fixer upper can be such an amazing investment opportunity. Buying a house that needs some improvements, but that won’t break the bank, can be a really great financial decision. Updating flooring, bathrooms, and kitchens are the most obvious and common ways to increase equity and the value of your home. But even simple changes, like painting and updating light fixtures can increase the value of your home.
Let me tell you a little personal story. In 2014, my husband and I bought a 1960s ranch in a desirable neighborhood outside of Nashville. We paid $430,000 for this house and put less than 20% down. This house needed updating, but we knew we could do the work slowly over several years. The first year we updated two bathrooms, replaced all the flooring with a beautiful hand scraped oak floor (that I still miss to this day), and removed the popcorn ceilings. We also fenced in the backyard. A couple years later, a bad storm destroyed our already rotting deck, so we demolished the whole thing and made a beautiful, larger stone paver patio.
In 2021, we took our tax refund and updated the kitchen by replacing the tile floor, painted the kitchen cabinets, and replaced the granite countertops. The house was gorgeous, but we needed more space. My husband was now permanently remote because of covid and we made the crazy decision to just move somewhere. Our kids were little and we figured, why not?
We considered adding on, but that would have required a HELOC or some type of loan and then we would have had a higher monthly payment, on top of student loans, one car payment, and kids preschool to cover. You know when you see the “our starter home is now our forever home because of our interest rate”? Well, that could have been us. We had a 1.99% interest rate. I know, crazy, right? You’re probably thinking why in the world would they give up that interest rate when they didn’t HAVE to move!! Well, in 7 years, we had increased the value of our home to over $1million. Was it worth never having a 1.99% interest rate again? You bet ya it was!
We sold our house in one weekend and with the proceeds we paid off my student loan, one car payment, all debt, and put the rest into savings. We negotiated a rent back with the buyers and started house hunting. I’m not going to go into details right now about a rent back, but it can be a great option if you need to sell first, but it’s not super common.
We decided upon an adorable mid century modern fixer upper (see the pattern) in the most idyllic neighborhood in Charlotte, North Carolina. We updated the exterior, the kitchen, remodeled a bathroom, and replaced the flooring in the downstairs. Two years later, when we decided to move to Paducah, Kentucky to be near family, we still made a (small) profit…because, equity. I bet you can guess what we bought in Paducah…yep, you guessed right. Another fixer upper!
Equity is amazing and can be life changing, but only if you use it!
Having too much wealth concentrated in your home creates risk. Selling allows you to diversify your assets across stocks, bonds, or other investment vehicles that might generate better returns.
To maximize your equity when selling:
Time your sale during a seller's market when possible
Make strategic improvements that offer high ROI before listing (like those improvements I talked about above)
Work with an experienced real estate agent who knows your local market
Consider tax implications (the $250,000/$500,000 capital gains exclusion for primary residences can make selling particularly attractive)
Your home's equity represents real wealth, but it's only truly valuable when you can access it. While home equity loans and lines of credit offer partial solutions, selling your home remains the most direct and complete way to unlock the full financial potential of your largest asset.
The decision to sell should always align with your broader financial goals and life circumstances, but understanding that your home equity isn't just a number on paper—it's real wealth waiting to be utilized—can open new possibilities for financial freedom and flexibility.
If you have any questions about your home’s equity or are interested in how you can sell your home to unlock your equity, reach out and schedule a call with me!
Your Paducah Realtor,
Jessica Rousseau
*Disclaimer: None of this is intended to replace the guidance and/or advice of an expert financial expert*
