Home Equity

Home Equity is important when buying a home, It’s the difference between what the home is worth and how much is still owed on your mortgage. For many, equity from homeownership is a sure set way to grow your income over time. As your home’s value increases over the long term and you pay down the principal on the mortgage, your equity grows. Home equity is the value of your house minus the amount you owe on your mortgage or home loan. When you first buy a house, your home equity is the same as your down payment. If you buy a house for $250,000 with a down payment of $25,000, you begin with $25,000 in home equity. As you can see having equity is a good thing for you as the homeowner/buyer. This is a good way to make further investments into the future you are currently building. In this article, we will go over what Home equity can do for you and further details, let’s begin!

Home Equity works differently with different circumstances. for example, A paid-for house means you have 100% equity in your home. However, having enough equity is just one requirement you’ll need to meet when you take out a home equity loan on a paid-off house. Home equity is a good idea no matter which way you are looking at it. f you use the funds to make improvements on your home or consolidate debt with a lower interest rate. However, a home equity loan is a bad idea if it will overburden your finances or if it only serves to shift debt around. Equity is a valuable asset, and it can enable you to, receive cash after you sell the home and pay all related costs. Borrow against it with a home equity loan or home equity line of credit (HELOC). Use it for a down payment on your next home purchase. How much equity can you borrow from your house? Depending on your financial history, lenders generally want to see an LTV of 80% or less, which means your home equity is 20% or more. In most cases, you can borrow up to 80% of your home’s value in total. So you may need more than 20% equity to take advantage of a home equity loan. In the first year, nearly three-quarters of your monthly $1000 mortgage payment (plus taxes and insurance) will go toward interest payments on the loan. With that loan, after five years you’ll have paid the balance down to about $182,000 – or $18,000 in equity.

You should not pay off your house early and here is why that is a bad idea, When you pay down your mortgage, you’re effectively locking in a return on your investment roughly equal to the loan’s interest rate. Paying off your mortgage early means you’re effectively using cash you could have invested elsewhere for the remaining life of the mortgage as much as 30 years. The next step to go over is what will happen to your equity if you happen to sell your home. Home equity is the difference between the market value of your home and the amount you owe on your mortgage and other debts secured by the home. If you sell a home in which you have equity, you can keep the difference once closing costs are paid and use it for new housing, other expenses, or savings.

6 Methods to building Home Equity

1. Increase your down payment
2. Make bigger and/or additional mortgage payments
3. Refinance and shorten your mortgage loan term
4. Discover unique sources of income
5. Invest in remodeling and home improvement
6. Wait until the value of your home increases

How is my Home Equity Calculated?

All the information needed to compute a company’s shareholder equity is available on its balance sheet. It is calculated by subtracting total liabilities from total assets. If equity is positive, the company has enough assets to cover its liabilities. If negative, the company’s liabilities exceed its assets.

MCS Mortgage Services offers many services to home buyers in Virginia and Maryland. If you are looking for professionals to go over Home Equity with you contact MCS Mortgage Services today. We look forward to hearing from you.