How You Can Utilize Home Equity
Today we’re briefly tackling home equity: what it is and how you can put it to use.
To calculate the equity you have in your home, start with your home’s value, and subtract the amount owed on any mortgages. So say that your home’s value is $300,000 and you made a 20% down payment. That means that you essentially own $60,000 of your home, that $60,000 being your home equity. Over the course of making payments on your home, you will begin to “own” more of your home, thus increasing your equity. In addition, if your home appreciates during the time you own it, any appreciation in value is added to your equity. A method of increasing your home equity is to repay your loan as quickly as possible since the more of your mortgage that you’ve paid off, the more equity you have in your home.
Now you may wonder just what exactly you’re able to do with your equity. First of all, it is an asset and is therefore part of your net worth. You’re able to take income or lump sum withdrawals from your equity if you ever need to. For instance, if you plan on moving you’d be able to utilize your home equity by putting some of it towards your new home. In addition, you’re able to get cash and use it for home improvements, funding higher education or other purposes. Paying your current expenses can occasionally be risky since you don’t know what the future holds, so experts advise to put the equity in a long-term investment.
Your loan officer will know all the details behind equity, so reach out to them if any of this interests you!