As a homeowner, one of your most powerful financial tools may be right under your roof. Home equity, the portion of your property that you truly own, can open doors to new opportunities, whether you’re planning to renovate, consolidate debt or even move into a new home.
What Is Home Equity?
Home equity is the difference between your home’s current market value and the amount you still owe on your mortgage. As you pay down your loan or your home appreciates in value, your equity grows. For example, if your home is worth $600,000 and you owe $300,000 on your mortgage, you have $300,000 in equity.
Many homeowners don’t realize just how much equity they’ve built, especially after the significant appreciation in home values in recent years. If you’ve owned your home for several years, chances are you’ve built up more equity than you think.
How Can You Use Your Home Equity?
There are several ways to access the equity in your home, but two of the most common are home equity loans and using that equity to help fund a move.
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Home Equity Loan:
A home equity loan allows you to borrow a lump sum of money, using your equity as collateral. These loans typically have fixed interest rates and are repaid over a set period, often five to thirty years. Because the funds are delivered upfront, this type of loan is ideal for large expenses such as: -
Major home renovations
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High-interest debt consolidation
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Education costs
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Emergency expenses or medical bills
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Using Equity to Move:
Your home equity can also play a crucial role if you’re thinking about buying your next home. You can use the equity from the sale of your current home as a down payment on a new one, possibly allowing you to move with little or no additional financing needed. A record number of people have enough equity to downsize into a smaller home without taking out a mortgage at all, allowing them to be all-cash buyers.
Home equity isn’t just a number on paper, it’s a financial asset that can help you move forward with confidence. Whether you’re looking to invest in your current home, pay down debt or make your next move, exploring your equity options could be the key.
Before making any decisions, it’s wise to speak with a trusted lender or real estate professional who can guide you based on your specific goals and financial situation. You might be closer to your next big step than you think.
