Home equity is the variable of home value that has tremendous potential for growth, especially in an energized economy.
When an individual buys a home, they immediately earn equity on their purchase. As you make mortgage payments and chip away at the amount you borrowed, the equity increases. The same happens as home values increase.
To calculate your home equity, simply take the home’s value and subtract the amount owed. It can quickly add up, making home equity an extremely valuable asset that can be used down the road for a variety of financial transactions.
The equity in your home can be used for your next big move. The down payment you invested in your first home is bundled into the equity, increasing your purchasing power for when the time comes to sell and rebuy your next home.
For those looking to make the most out of their equity without packing any boxes, there are other options. For instance, homeowners can borrow against the equity they’ve earned. This is known as a second mortgage or home equity line of credit. The funds can be used for various purposes, including upgrades to the home, that will increase its value and make up for some of the equity resources dispensed for the loan.
Home equity loans provide a large amount of cash at competitive rates. There are two types. A home equity loan in a lump sum provides a rapid injection of cash that’s paid in monthly installments. Additionally, borrowers may have up to 15 years to repay.
The other type of loan, a home equity line of credit, allows the borrower to pluck money out as needed. It works like a credit card and is useful for home renovations, college tuition or other high-value expenses.
Buying a home is great investment with added perks, like home equity. If you would like to learn more about making the most of your investment, or how to plan for the future, please reach out to us today with any of your mortgage-related inquiries.