A simple way to understand what home equity is is to think of it as the portion of your home that you truly own, that is, the value of your home not included in your current home loan. Home equity is what makes homeownership such a great investment. The opportunity to increase equity can be quite significant, making it one of your most valuable assets.
Find out how to build it up and how to use it to its full potential. **Want to skip ahead and start using your equity ASAP? Fill out our online application to get started.
Repaying your loan: Increasing your equity is as simple as making your monthly mortgage payments. How much increase you can expect depends on several factors, including how much of your payment goes towards the principal and interest. The great news is your rate of building equity increases with every passing year of mortgage payments.
You’ll want to note that not all home loans work this way. For example, if you have an interest-only home loan, you may have to make extra payments to increase your home equity.
Increasing home value: Another way to boost your home equity is to do nothing! Some areas appreciate value faster than others. So if you live in an area with increasing property values, you can guess that yours is also going up.
Still, others choose to give the value a boost by making home improvements. If you’re looking to make upgrades for the sole purpose of increasing property value, you may want to investigate which upgrades give you the most bang for your buck, and what upgrades are in demand in your area.
Using Home Equity
Since home equity is an asset, it’s part of your net worth — that means that you can withdraw from your equity should you choose to or you can save it as an inheritance for your children.
Here are some ideas for using your home equity should you decide to withdraw:
- Use the equity from the sale of your home to buy your next home
- Borrow against the equity to use as you please. Anything from business start-ups to home improvements to higher education expenses can be paid with a home equity loan.
- Fund your retirement with a reverse mortgage. This type of home equity loan doesn’t require a monthly payment and is repaid when you leave your home.
There are so many ways to take advantage of this valuable asset, and we’re sure you’ve already thought of quite a few different ways you could use your equity. Want to learn more? Contact us today for an obligation-free consultation and get the answers you need from a trusted mortgage professional.