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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 or 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 title of - your house. This is a very comparable analogy to that of the process 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 - let alone the best one - for you and how it would impact the overall equity of 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 which has been already paid - again, known as the equity. While others can elect 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 might 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.




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