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Ways to take advantage of the equity in your property

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Owning a home has a lot of benefits. Would you like to know how to take advantage of the equity in your home? Homeownership allows for more freedom and stability. One central selling point for owning property is that property values tend to increase over time. Historically, home values rise over time. While economic factors can temporarily lower property values, it’s common to earn equity in a home after long-term ownership.

If you have home equity in your house, you have several options for using the equity to meet your needs.

What is equity?

Equity in a home is the difference between what the house is worth and what you owe. For example, if your house is valued at $450,000 and you still owe $200,000 on your mortgage loan, your total equity is $250,000 or 55%.

You can build equity in your home by either paying down your loan (increasing the difference between the current value and the total owed). Additionally, you may gain equity in the home when the market shifts and your house is worth more.

Homes can have negative equity as well. If the value of your house dips below the amount you currently owe, your home is considered underwater. If your home is worth less than you owe, simply holding on to the house and making payments could be sufficient until the market readjusts.

How to determine the amount of equity in your home

You can figure out how much equity you have in your home by subtracting the amount you owe from the total value of your property. There are a few ways to figure out how much your house is worth.

There are several ways to figure out how much your home is worth, including:

Figuring out the fair market value: Look at comparable homes in your neighborhood to see the listing price. This can give you a rough estimate of how much your home is worth. Real estate agents use the same method by looking at the sales prices of similar homes in a neighborhood.

Get an appraisal: You’ll have to pay a fee (typically between $250 and $500) for an appraiser to calculate the value of your home. It could be a good investment if you’ve done any renovations or the housing market has shifted since you purchased the home. If you plan to refinance your home or take out a home equity loan, your lender will likely require an appraisal.

Check the county assessor’s office: Your property taxes are based on the county’s determined home value. You can contact your county assessor’s office for documents detailing your property value. Did you know that many real estate transactions are public records? You can find a lot of information (including the latest sales prices) at the local recorder’s office.

Ways to take advantage of the equity in my house

Once you’ve determined how much equity you have in your house, you might wonder what options you have for accessing it. Here are a few things you can do to utilize the equity in your property.

Nothing: If you don’t need the money and you plan to stay in place for a while, you can leave your equity alone, continue to make payments, and allow the equity to grow.  

Refinance to eliminate PMI: If you bought your home with less than 20 percent down, you are likely paying for private mortgage insurance. Once you have accumulated 20% equity in your house, you can refinance to remove that payment. This could lower your monthly mortgage payment.

Cash-out refinances: If you need access to the equity in your home for a large purchase, you can apply for a cash-out refinance. A refinance will replace your current loan with a new one. For example, if you have $250,000 equity in your home and currently owe $200,000, you could take a cash-out refinance of $150,000. You would receive the $150,000 in cash. Your new loan balance would be $350,000. You could use this time to get a lower interest rate or change the repayment terms on your loan.

Home equity loan: A home equity loan also uses the equity in your house to provide a source of cash. It does not work quite the same as a cash-out refinance. Unlike the cash-out refinance, a home equity loan does not replace your current mortgage. Your home equity loan is an additional loan, like a second mortgage. You use your home as collateral to secure this type of payment.

Home equity line of credit:  A home equity line of credit works a little like a credit card and a little like a loan. Lenders will give you a check or a deposit for the lump-sum loan amount with a home loan. A line of credit gives you recurring access to a certain balance. You can borrow up to the maximum as many times as you want, so long as you repay what you owe. HELOCs have a withdrawal period followed by a repayment period.

Sell your house for cash: You can sell your house, pay off any remaining debt, and use the balance to start a new adventure. Selling your home for cash allows you to avoid paying agent fees, and you may be able to sell your home on your own terms and at a faster pace.

Ready to sell your home for cash? Reach out today for a fast cash offer on your house.

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