What is Home Equity & How You Can Utilize It
Home Equity can be a tricky concept to understand although, once you do, you’ll realize just how valuable it can be for you! We’re briefly tackling just what equity is, and how you can put it to use.
The simplest of ways to begin understanding equity is to 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, therefore you essentially own $60,000 of your home. Over the course of making payments on your home, in combination with your home appreciating, you will begin to “own” more of your home, thus your equity is increasing. Therefore if you want to increase your equity (which you should) then we’d advise to repay your loan as quickly as you’re able to. The more of you mortgage that you’ve paid off, the more equity you have in your home.
Now comes the question of what you’re able to do with that equity. Equity is an asset and is a part of your net worth. If needed, you’d be able to take income or lump sum withdrawals from your equity. If you plan on moving anytime, you’d be able to put some of your equity towards your new home. You’re also able to get cash and use it for home improvements, funding higher education or for other purposes. Although, experts advise to put the money towards a long-term investment in your future as paying your current expenses can be risky since you don’t know what the future holds.
Your loan officer will know all the details behind equity, so reach out to them if any of this interests you.