How Much Equity Do I Need When Selling My Home?


The reasons for selling an existing property vary as much as the number of houses on the market. Maybe you’ve heard about the seller’s market and want in on the action. Maybe your job has taken you outside the Orlando area. Or maybe you’ve outgrown your current home.

You’ve heard the amount of equity in your home determines whether you should sell. Do you find yourself asking “How much equity do I need when selling my home?” Well, then you’ve come to the right place. 

How to Determine Current Equity 

Before you can determine if you have enough equity, you have to figure out what equity you have. Begin by adding up the payoff amounts of any outstanding liens (i.e., mortgages, home equity loans, etc.) against the property. With interest accumulating daily, you may get a total to satisfy a loan by a certain date.  

Just get a ballpark figure for now. Then find out the sale prices for houses similar to yours or the comp rates. Subtract what you owe from the value of your home. Now you have your home equity, or how much of your home you own free and clear.

Home equity will slowly accumulate year over year. As you pay down any outstanding mortgages, you gain more equity. A fun trick that also tends to happen with real estate, especially now, is that the property appreciates in value. For example, even during the pandemic, home equity increased an average of 6.6 percent

Costs to Consider When Selling

Let’s say you determine you have enough equity to pay off existing loans with some extra cash leftover. 

Now you need to consider how much it will cost you to sell. Hire a real estate agent to list your home and expect to pay commissions around 6 percent to them. 

During the negotiations with the buyer, you may agree to pay part or all of their closing costs. These run an average of another 2-5 percent of the sale price. 

After all this shakes out and you close, you still have to move. And that costs money, too, usually another $1,000.  

Once you’ve added all these estimated costs together, subtract that from your equity. Depending on your circumstances, if you come up with a negative number, hang onto the house if you can. 

A positive number doesn’t necessarily give you a green light to move on out, though. Think about what that money needs to do now. If you plan to use it as a new home’s down payment, will it cover at least 20 percent?

Capital Gains Tax Implications

A word about capital gains taxes: in short, the government will want its cut. While Florida has no state income tax, when you sell your property, you will have federal taxes on the profit. A single person can earn tax-free profit of up to $250,000 when selling their primary residence. A married couple can earn up to $500,000 profit tax-free. You have to live there at least 183 days in a year for it to count as a primary residence.  

Thinking of Selling Your Central Florida Home?

If you want advice on whether it makes sense to sell now, talk with one of our realty experts to find out the best option for you. Call us at 321-218-4753 or complete our online form