What does Home Equity Mean for You?
Firstly, it's important that you understand what the term (home)
'equity' represents. Equity, is essentially representative of the total
amount paid on your home or otherwise the possessed value of your
current home - even if it's not completely paid off. That means, that
although unfortunate, the equity (or current paid-value) of your home
can easily fluctuate, based on market value - but also the maintenance
upkeep of your home.
For example, it's impractical to assume that if you have (paid) $150,000
of equity in your home, yet there's recently been $20,000 dollars. worth
of flood-damage; that without repair it would somehow maintain its
value - this is not practical or probable. It's important that you
consider equity as a 'hypothetical' fellow home buyer or prospective
estate agency would in appraising or purchasing your home.
Whether or not you still owe money to the bank (typically via a
mortgage) and to what extent is calculated into your homes equity, but
also a reminder of the reality that the bank or lender in which you
acquired your home through still currently owns - has a lien on the
of - your house. This is a very comparable analogy to that of the
in which you might purchase a vehicle by taking out a loan.
It's worth researching and determining whether in the beginning or later
on in your house-payment endeavors if then, refinancing is an option
alone the best one - for you and how it would impact the overall equity
your home, money owed to the lender, and how practical or beneficial
taking on such additional debt or financial responsibility would be for
you and your financial circumstances.
Some individuals, in cases of emergency for example, will refinance
their home - acquiring a lump-sum payment reflective of a portion in
has been already paid - again, known as the equity. While others can
to attempt to refinance their home for a more affordable rate plan.
However, this option may not be available to you, dependent upon the
stage of repayment you are currently in, as well as your credit and
other factors such as salary for example - or cosigner.
Some consumers, comparably to credit card features and plans, may elect
at some point or another to enroll in what's known as a HELOC, or home
equity line of credit. Why someone would elect to do such would likely
also demonstrate an emergency, such as extensive funds to pay for
damages to their home or perhaps comparable circumstances. Whether or
not you are approved is based on far more factors beyond just the fact
that you paid or currently have equity in your home.
Lastly, it behooves any home-buyer and owner to know - although they
not want to hear it - as mentioned above with a market-drop you could
easily be 'in over your head' or what's known as 'upside down' on your
payments and home equity due to the market value of your home dropping.
That means, even with the reality that you still, for example, have
another $200,000 dollars to pay off in your home mortgage, doesn't take
away from the reality that your house could be worth less by the time
you have fully paid off your home and acquired the title.