Home Equity, Quickly Explained

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Home Equity, Quickly Explained

Let’s look at what home equity is and how you can put it to work.

Home equity is the difference between the value of your home and what you owe on your mortgage.

If your house is worth three-hundred-thousand dollars and you owe two-hundred-fifty-thousand dollars on your mortgage, you have fifty-thousand dollars of equity.

Your equity increases over time as you pay down your mortgage principal.

It also increases if your home’s value rises.

So, if your home value rose from three-hundred-thousand dollars to four-hundred-thousand dollars, your equity would grow with it.

On the other hand, if home prices fall, your equity would too.

You can borrow against your home’s equity with either a home equity loan or line of credit.

With a home equity loan, you’ll get funds in one lump sum and make fixed monthly payments.

A home equity line of credit lets you borrow funds as needed and only pay interest on what you borrow.

Both options provide flexible funds that you can use for almost any purpose.

Such as home improvements, education expenses, paying off high-interest debt, or paying for life events, like weddings or adoption.

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