Equity is the difference between what you owe on your home and what it’s worth. If you purchase a home using a small down payment, you’ll have a small amount of equity.
However, as time passes, your mortgage balance will decrease and (hopefully) your property value will increase. This will strengthen your equity position.
There are several things you can do with this built-up equity in the property. If you decide to sell the property, you could take that equity and use it as a down payment for the next property you buy.
You may decide to stay where you are and use the equity in the property for your own purposes. Some property owners use their equity for home improvement, to pay down higher-interest debt, or to pay for college for their kids.
How would you access this equity? Your lender could help you take out a home equity loan or establish a home equity line of credit.
Each has both benefits and challenges. The home equity loan will most likely give you a fixed rate, but once you take it out, you would need to pay back the entire loan before being able to reuse that portion of your equity.
The home equity line of credit, on the other hand, works similarly to a credit card. You can pay it down or off, then reuse the same money again and again. But your variable interest rate is tied to an economic indicator, meaning your payment could go up significantly over time.
Get in touch with our office to learn more about your equity loan options.