Finances can be confusing (understatement of the year!) – it can feel like you need a degree to understand some aspects of your own finances. You find yourself staring at numbers on a screen and working out what they mean for your financial future. Equity is one such topic. How much equity do you have? The other way of wording this is considering how much of your home you actually own (compared to those pesky lenders!).
Lots of people will read this intro and click away, saving the panic for another day. It’s actually a piece of cake once you grasp the basics. In this guide, we’ll unravel the mysteries of home equity and show you how to crunch the numbers for your Grovedale property like a pro. Let’s dive in, shall we?
What is Home Equity?
Cash in your bank account is tangible and you can take it whenever you want – home equity addresses your biggest asset – your home. What is your home worth? What is the amount left on your mortgage? What’s the difference between the two? You’ve been making regular mortgage payments, so the part of your home that you own each year grows, and this is how equity works.
Let’s say as an example that your property is worth $700,000. You’ve been paying mortgage payments regularly for numerous years (we don’t need to tell you, right!?). You now owe around $150,000 of the mortgage because of all the payments. A financial expert would say that you have equity of around $550,000 because this is the portion that belongs to you.
Why is Home Equity Important?
Home equity: the secret for financial health and future goals. It’s like having a hidden treasure that grows over time while you pay off your mortgage and watch your property value skyrocket. Unlock this wealth for retirement or splurge on fancy renovations, education, or maybe even your own business venture. It’s time to make your equity work its magic.
One of the advantages of home equity is that it provides lenders and others with a comprehensive understanding of your financial situation, going beyond mere bank balances. It serves as a safety net, assuring you that you have accumulated equity in your home, which can be utilized when unexpected financial challenges arise. So, stay savvy and let your home sweet home be your secret financial weapon. High equity tells lenders that you’re amazing at making repayments, trustworthy, and less of a risk compared to others – all those on-time payments were worthwhile, after all.
How to Calculate Home Equity
To crack this equation, here’s what you do:
- Unleash the mighty power of appraisal or channel your inner detective to uncover recent sales of similar properties in your area for the ultimate home value intel.
- Summon the courage to face the total outstanding balance on your mortgage – the final boss of homeownership challenges.
- Engage in a thrilling battle of subtraction as you pit the outstanding balance against the current market value, emerging victorious with your home equity treasure.
Don’t be afraid to contact a financial professional if you need help, whether you’re just interested or you’re planning a move to somewhere like Lifestyle Communities in Grovedale!