Home Equity
Home equity is a homeowner’s acquired stake in the value of a home. Home equity may be calculated by subtracting any outstanding mortgage balance from the home’s current fair market value.
When a homeowner’s mortgage balance decreases, usually through steady payments that decrease the principal, equity in the home generally increases. Exceptions to this would occur when a homeowner makes only required payments on an interest-only loan (which would not decrease the principal) and/or circumstances cause the home’s fair market value to remain the same or decrease.
If a homeowner has a lien or a second mortgage against a home, these amounts will also have to be subtracted from the appraised value of the home, along with the mortgage, to estimate the equity of a home. Once the actual home equity has been established, the homeowner may use it for many purposes.
Spotlight on Home Equity
How to Use Home Equity to Your Advantage
Home equity refers to the difference between the balance of all liens on a home and its fair market value. Using home equity to raise your personal wealth is a common practice.
Homeowners usually gain equity in their homes when they own a home for a period of time with a good payment hist... Continue Reading »
How to Use Home Equity to Your Advantage
Home equity refers to the difference between the balance of all liens on a home and its fair market value. Using home equity to raise your personal wealth is a common practice.
Homeowners usuall...
About Home Equity
For example, you may borrow against your home equity and use the loan to make renovations on the home to increase its value. Alternatively, you may use the money to pay for your child's tuition or even invest in business ventures by purchasing another piece of property.
Such loans may be obtained in the form of a home equity loan or a home equity line of credit. A home equity loan is a secured loan which is based on the amount of equity that the owner has in the home. The homeowner may be allowed to borrow almost the full amount of their equity. However, it is important for every homeowner to consider this financing option very carefully, as well as fully understand the agreement and agree on all fees before going ahead with home equity loans. On the other hand, a home equity credit line is a figure normally about 75% of the homeís appraised value, less the balance due on the existing mortgage, as well as any other existing liens on the home. A home equity line of credit may be used for any purposes and at any time.
Whether you decide to settle for the home equity loan or the home equity line of credit, it is important to shop around to find a financier who offers the best rates without eating you out of house and home in the process of securing your mortgage. Moreover, be sure to seek professional advice from financial experts before you apply for your home equity loan or line of credit.