What Is Home Equity?
Home equity is a tangible value placed on the dollar amount between your home’s appraised value and the principal amount owed on your mortgage. For example, if you owe $150,000 on your mortgage and your home is worth $200,000, then you would have earned $50,000 in home equity. For refinance purpose you would be at 75% Loan to Value. Home equity has become the American way, because there are so many ways to use it. You can borrower against you home equity.
As you chip away at the principal balance through payments, your stake in ownership expands while the lender’s diminishes. Accumulating home equity bears resemblance to investing in a long-term asset, akin to bonds. Your funds are essentially tied up and not entirely liquid until you sell the home. Nevertheless, there exist methods to tap into a portion of your equity and transform it into cash while retaining ownership of the property.
Home equity represents the present market worth of your home, subtracted by your outstanding mortgage balance.
Any increase in home equity can stem from:
- Appreciation in market value over time, arising from property value appreciation and enhancements made to the home.
- Repayment of the principal balance on your mortgage.
You can cash out your home equity, or you can do nothing and let the equity appreciate over time. Typically the more equity you have, the lower the interest rate you will qualify for when applying for a home equity loan.
Home Equity Application Process
Fill out a simple loan Request form online . Shortly after completing the application, we will connect you to several leading home equity broker and mortgage lenders in your local region. All of these lenders have been pre-screened and all will be offering multiple solutions for fixed interest rate equity loans and variable rate home equity credit lines.
Home equity financing is great financing tools for gaining quick accessing to money with a HELOC for refinancing revolving debt and student loans. Homeowners can select from fixed rate home loans or variable rate home equity lines of credit that feature revolving access to your finance your home equity.
Borrowing Against Home Equity
Through a home equity loan, homeowners can secure funds by leveraging their property as collateral. Typically, individuals opting for this option receive a one-time disbursement, commonly used for purposes such as down payments or debt consolidation. Repayment of the loan occurs at a fixed interest rate over a set period.
On the other hand, a HELOC functions as a revolving line of credit rather than a lump-sum loan. The home equity line of credit recipients are granted a predetermined credit limit from which they can draw funds. Subsequently, borrowers commence repaying the borrowed amount along with accrued interest after a specified period. Upon conclusion of the HELOC term, borrowers are unable to access further funds against their property and are obligated to settle the principal sum and accumulated interest.