January 9, 2020
What is home equity?
Equity is the portion of the home that you truly own and does not need to be repaid to any lender.
How is home equity calculated?
Current Appraised Value – Mortgage Loan Balance = Home Equity
Subtract the amount you owe on your home loan/s from its appraised value to get how much equity you have in your home.
Appraised Value is $500,000 – $230,000 Loan Balance = $270,000 in Home Equity
How do you use your homes equity to make renovations?
A home equity loan (second mortgage) allows you to borrow a certain amount for your renovation. The equity in your home is used as collateral, giving you free access to spend the money on your home project.
A home equity line of credit, or HELOC, is typically a variable-rate line of credit based on your equity, that allows you to borrow and repay repeatedly.
You may also have the ability to refinance, which allows you to turn your equity into cash – referred to as “cash-out” refinancing. This gives you access to the equity without selling your home.
Talk to a Loan Officer to learn more about your options.