Home Equity Loans
What if you had an investment that had grown in value, but you didn’t know how much it was worth, and you couldn’t withdraw any money from it? You’d probably look for a different investment.
Now think of your home. If you’ve owned it for a while, it’s probably worth more than when you bought it, so that additional value is money you could access. That’s how a home equity loan works. You find out what your home is worth, and then borrow a portion of the value that exceeds your mortgage balance.
What is home equity?
Home equity is the difference between the appraised value of your home and the remaining balance of your home loan. As a homeowner, you build home equity by making a down payment and making principal payments against your mortgage.
If the value of your home increases on the fair market, you stand to benefit from the potential increase in home equity when you sell your property. This is another way to increase home equity.
Home equity can be used as collateral for home equity loans or home equity lines of credit (HELOC). So, if you have home equity, you may be able to use it as a lower interest solution than typical credit cards provide.
