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Home Equity

Home Equity

Do you know what home equity is?

Do you know how to build equity in your home? Homeowners should know the answer to these two questions. That is why we are sharing that information with you.

Home equity is the difference between your outstanding mortgage balance and the current market value of your home. To build equity in your home, you must continue paying your mortgage, and if you can make extra payments towards the principal balance, it is even better. Another great way to build your equity would be to make home improvements and maintain your home well. That is called home appreciation; as the value of your home rises, the equity will too.

Okay, so now you know what home equity is, but what can building equity do for you?

Well, first and foremost, when you sell your house, the more equity you have in the home, the more money you take for yourself at the end of the transaction. But that isn’t all; if you want to take advantage of your equity, you can do that and remain in the home! There are three ways to utilize your equity while staying in the house.

The first option, you can get a home equity line of credit; this is a loan secured by the property. It is a form of revolving credit, meaning you can use as much of the loan as you want and pay it off up to your maximum amount when you want.

The second option is a home equity loan secured by your home and is referred to as a second mortgage. How this works is you borrow a set amount, and you would repay this loan similarly to a mortgage. You have to pay the loan back within the fixed time agreed upon signing.

The third option would be to refinance your current mortgage and pull extra funds from equity. That would then be paid as a mortgage.

For more information on the home equity line of credit, equity loans, and refinancing, give us a call.

There are many ways to use your home equity for gains; just be mindful of budgeting properly. You can do what you please with the funds when you take equity out of your home; some of the more common ways people use the funds are for home improvements, debt consolidation, purchasing investment properties, etc. There are always risks involved in all endeavours, especially when borrowing more money against your home.

If you want to learn more about home equity, if you have any questions about pulling equity, or you want to know more about making your equity work for you, get in touch with our office