"Should I..." Series: Sell My House to Realize the Equity

Welcome to my “Should I…” series!  In this series, I will answer questions that I hear frequently from my clients.  I would love to answer your questions too.  So leave any questions you may have in the comments below and I will answer them in a future “Should I…” post.

Should I sell my house now to take advantage of the equity while prices are still high?

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You can certainly cash in the equity you have to move into a house that is bigger, in a better neighborhood or school district, or just better meets your family’s needs. 

But keep in mind that chances are the new house you’re looking at has also increased in value and thus your equity may not get you as far as you think (or hoped) it would. Crunch the numbers to be sure you will be able to afford the new monthly expenses associated with a larger, more expensive house and that the equity you take out of your home will cover the down payment for a new one. And will you have to use any of that equity for moving expenses, new furnishings, or remodeling?

Conversely, we get the question all the time of whether it makes sense to sell your current house to downsize to something smaller, and keep that equity. In all likelihood, downsizing to a smaller house in the same area may still require all of the equity you get out of your current house, after paying off any mortgage.

Some people consider selling their home, investing the equity and renting until housing prices come back down. But can you truthfully say you know when that will be? Not to mention, you give up a fixed monthly mortgage payment for the risk of paying increasing rents which are beyond your control.