Home Equity can be an incredibly valuable tool for homeowners when used properly. Today we’re briefly tackling just what home equity is, and how you can put it to use and take advantage of it.
To understand equity, start with your home’s value and subtract the amount owed on any mortgages. Say that your home’s value is $300,000 and you made a 20% down payment upon purchase, therefore you essentially own $60,000 of your home. Over the course of the payments made on your home, in combination with your home appreciating, you will begin to “own” more of your home. Thus, your equity is increasing. Therefore, this goes to show that if you want to increase your equity we’d advise to repay your loan as quickly as possible as the more of you mortgage that you’ve paid off, the more equity you have in your home.
Equity is an asset and is a part of your net worth therefore, if you need to take income or lump sum withdrawals from your equity, you’re able to do so. This could be used in numerous situations, such as if you plan on moving and want to put some of your equity towards a new home. You’re also able to get cash and use it for home improvements, funding higher education or for other purposes. 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, but if you feel confident enough in your future’s stability then there is little risk.
Reach out to your loan officer as they will know all the details behind equity!