How Much Equity Should I Have Before Selling My Home In SF Bay Area

Homeowners looking to sell their homes but still owe on their mortgage should make sure they’ve built up sufficient equity. Otherwise, the sale proceeds will mainly go towards paying off the loan. But how much equity is necessary before selling?

The required equity before selling depends on what you aim to do afterward. If you’re downsizing or considering renting, you’ll only need a small amount of equity. However, if you’re upgrading to a larger property, you should aim for at least 25% equity. This figure accounts for closing costs, the down payment on your new home or rental deposit, and funds for settling into your new place.

How Much Equity Should I Have Before Selling My Home In SF Bay Area

To understand equity and its role when you sell your home, we wrote this blog. Here, we went into detail on how to calculate home equity, how to make it grow, how much equity you need in your house before selling, and a lot more!

According to Freddie Mac, home equity is the difference between your home worth and your mortgage balance. In other words, it’s the amount of money from your home’s value that you actually own or your financial stake in your property.

When you make monthly mortgage payments, your principal loan is reduced and you start building equity. 

To figure out how much more equity you require to sell a house, you must understand how to calculate equity. It’s straightforward: subtract your mortgage balance and any property liens from the home’s current value.

Here it is in formula form:

Property Value – Current Mortgage Balance – Liens = Home Equity

How to Calculate Your Home Equity In SF Bay Area

Let’s look at how you can estimate the value of your home as well as your remaining loan balance to calculate your home equity.

Home Market Value

Your home’s market worth, or fair market value, is the price it would likely fetch on the regular housing market in typical conditions. You can determine this estimated value through an appraisal, online tools, or a comparative market analysis.

Home Market Value in SF Bay Area

Getting a home appraisal is one of the most accurate ways to determine home values. Typically, professional appraisers do a traditional in-person evaluation of your property, but automated valuation models are also utilized these days. 

Another method to determine the fair market value of your property is by using online tools designed for home valuation. These tools typically analyze public data and sales records of nearby properties.

Simply complete a brief questionnaire with details about your property, and you’ll receive an estimate of your home’s value within two minutes.

Real estate agents are experts in conducting CMAs or comparative market analysis. They use the sales records of recently sold homes in your area as benchmarks in their estimation. 

Besides knowing your home’s market value, it’s crucial to determine the remaining balance on your mortgage loan with the lender. Reach out to them directly to request an official payoff estimate. This will detail your outstanding principal, which you deduct from your home’s value to find your equity.

You can also ask for a copy of this payoff quote online, as many mortgage services utilize online portals.


Basically, nope. Mortgage interest doesn’t add to your property value. When you make your monthly payment, some of it chips away at what you borrowed, while the rest covers the interest. Only the part that chips away at your loan boosts your ownership stake.

At the start, most of what you pay goes to interest. But over time, more and more of your payment chips away at what you owe. That’s when your ownership stake grows.

If you’re curious about the breakdown of your payments, take a look at the amortization schedule your lender gave you when you got the loan.

Home equity doesn’t grow overnight; however, it is worth knowing that you can grow it in a lot of ways.

Doing your best to grow your home’s equity translates to a profitable house sale down the road…

How Does Home Equity Grow In SF Bay Area

Mortgage Payments

As said before, some of what you pay each month for your mortgage goes towards owning more of your home. This means you have a bigger stake in it.

If you get a loan for either 15 or 30 years, you’re not just repaying what you borrowed. You’re also making yourself richer by owning more of your home.

With a 15-year loan, you’ll build up your ownership faster and pay less interest. But with a 30-year loan, your monthly payments are smaller. Still, you can pay more each month and ask the lender to put more towards what you owe, helping you own more of your home sooner.

Mortgage Payments In SF Bay Area

This will also lower your loan’s interest rate since it is computed based on the principal balance.

The down payment on a property also counts toward equity. So when you put in a large down payment, let’s say 20%, you already own 20% of the home and you gain more equity from the start.

Note that you can also gain equity by putting in a down payment of less than 20%; however, a portion of your initial monthly payments will go to private mortgage insurance (PMI).

If you don’t quickly sell your house after purchasing it, its worth is likely to go up, increasing your ownership stake.

The National Association of Realtors (NAR) reports that single-family home values surged by double digits in 2022 and are still climbing.

You can’t directly influence how much your property appreciates—it hinges on your local real estate scene. Yet, typically, the market trend favors growth in your home’s value over time, boosting your stake in it.

As seen earlier, when your home’s worth goes up, its equity also rises. The best strategy to boost your property’s value is by renovating and enhancing it before putting it on the market.

Usually, updating your home with modern features greatly affects its resale worth, making it crucial to prioritize such projects to increase home equity. Some key upgrades to consider for building equity include:

  • Kitchen and bathroom remodel
  • Landscaping or improvement of curb appeal (especially the front yard)
  • Addition of an outdoor deck
  • Energy efficient windows
  • New or refinished wood flooring
  • Basement and attic improvements
  • Addition of game room, swimming pool, court, wine cellar, etc.
  • Improved fencing

Owning a property with equity means you make money when you sell. Equity is what’s left from your home’s value after subtracting the mortgage.

With sufficient equity, you get cash after clearing your mortgage, taxes, and any debts on the property.

Equity can pay for closing fees and agent charges. If it’s big enough, the leftover cash can fund a new home’s down payment, and moving costs, and help kickstart your life in a new place.

How Does Equity Affect the Sale of Your House In SF Bay Area

In the real estate world, you don’t necessarily need equity to sell a house. Selling a house without equity doesn’t usually impact the buying and selling procedure. However, you’ll need to cover the costs of selling…

It’s best to sell your house when you have sufficient equity to cover your current mortgage, taxes, personal loans (like car loans), and any property liens.

Having enough equity also provides funds for a rental security deposit new home down payment, essential purchases, and other costs.

Do You Have to Have Equity in the House Before Selling In SF Bay Area

The amount of money you have invested in your property before selling depends on why you’re selling it in the real estate market.

If you have plenty of money and are just selling to move, then you may not need much invested because you can pay off the mortgage yourself.

You may also need less money if you’re switching to renting, as most security deposits are only a month’s rent unless you’re moving to New York or another big city.

How Much Equity Do You Need Before Selling Your Home In SF Bay Area

But if you’re looking to buy a bigger home for your growing family, you’ll need to have at least 15% to 25% of the sale price already invested. This is also true if you have other debts to pay off.

Two of the major reasons why most homeowners wait for their home equity to build is to avoid paying closing costs and seller commissions straight out of pocket.

According to NAR, the closing costs of a house sale are around 2% to 5% of the proceeds (this does not include seller commission). Many homeowners pay for the following during closing:

  • Origination charges
  • Service charges
  • Prepaids and escrow payments
  • Government fees
  • Capital gains tax
  • HOA fees
  • Transfer taxes and recording fees
  • Title insurance
  • Attorney fees
  • Credits for closing costs or sales costs

Apart from these fees, you also have to pay for a licensed real estate agent commission. This may vary from state to state, but generally, it costs 5% to 6% of the home’s sales price. That puts real estate fees at 7% to 11% of the home’s sales price!

When your home doesn’t have enough equity or has negative equity, there’s still hope. You can sell it for cash, even if you’re still paying off a mortgage. This is called a short sale, where the money goes towards your mortgage.

Since your home equity only affects you and potential buyers, cash buyers can still purchase it.

Selling to a cash buyer saves time, especially if your house is facing foreclosure and you need to pay off your mortgage quickly.

What if I Don’t Have Any Equity in My Home In SF Bay Area

Cash buyers close deals in as little as seven days because they don’t need loan approval. They buy houses as-is, so you don’t have to worry about repairs or renovations. Essentially, getting a cash offer is convenient.

To get a cash offer, you will need to fill out a form on their website. They’ll schedule a visit to your home and give you an accurate offer based on their informal inspection.

If you take their offer, they’ll ask you to sign an electronic contract to seal the deal. The sale would proceed to the closing table, you’ll get the money in your bank, and you’ll be asked when you would like to move out.

Selling your house to a cash buyer gives you flexibility. It makes home sales a lot less stressful and overwhelming.

As a homeowner, your aim is to not just maintain but also increase your property’s value. This pays off when you sell in the real estate market.

Targeting a 25% or higher equity before selling is advised—it covers expenses like closing costs, agent commissions, and new home down payments.

If your home lacks enough equity, you can still sell and settle your mortgage. Cash buyers buy as-is and make immediate cash offers.

At We Buy Houses in SF Bay Area, we offer fair cash deals for homes with low equity. We’ll help you sell quickly without repairs.

When you’re ready to save on closing costs, agent commission, and repairs, just fill out our form below or contact us at (408) 557-7554!

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The Easiest Way To Sell Your House Fast In SF Bay Area

You’re in the driver’s seat when you accept our cash offer for your house. We make the process simple, fast, and easy to follow when working with us. You have no obligation to accept our cash offer for your home when contacting us for a fair cash offer for your home. No matter the reason you want to sell your house, we want to buy your home as is. Remember that you get many benefits that include no real estate agent commissions, no cleaning, no improvements, and no stress. Our cash offer for your as-is house assures you of fast cash payment at closing with a reputable Title company. You can count on our company to give you a fair cash offer for your home! If you’re still thinking, “I need to sell my house fast”, calling us could be your best decision all day. 🙂

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Gagan Saini

Author: Saini

My name is Saini, and I founded the We Buy Houses in SF Bay Area team with years of experience in the real estate industry. I have assisted numerous sellers in selling their homes quickly, “AS-IS”, and for a fair price.

He’s been featured in multiple publications including Yahoo Finance, GoBankingRates, LegalZoom, The Mortgage Report, Apartment Therapy, US News and World Report, and SuperMoney among others.

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