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Home Values Are Up And So Is Your Equity.

Home equity blog banner. Photo of back of house under construction with new deck installation

Home values have steadily risen over the past couple years throughout the country, and continue to hold these high values. Homeowners are in a position to reap substantial benefits. If selling your home is your goal, you will likely realize considerable gains. However, if you plan to stay in your home, you’re still able to improve your financial standing significantly.

Tapping into your home’s equity is a great way to enhance your finances and build even more value in your home. Whether you’re interested in upgrading your house or consolidating debt, the longer loan terms and lower interest rates of home loans are sure to benefit you financially.

What is Home Equity?

Your home’s equity is the difference between the current value of your home and what you owe. You can easily calculate your home’s equity using the following equation:

HOME EQUITY = Appraised Value of Home – Amount Owed

For example, if the appraised value of your home is $300,000, and you still owe $200,000, then your home’s equity would be $100,000.

With home values continuing to rise, so does your equity. You can use a portion of this equity for just about any purpose – putting you in a better financial position.

How Can You Access Your Home’s Equity?

There are several different ways to tap into your home’s equity, including:

  • Cash-Out Refinance: A cash-out refinance is a type of mortgage refinance. With this option, you’re able to obtain a portion of your home’s equity as cash when you close on the loan. This is an excellent strategy if you’re already planning on refinancing your first mortgage, whether to take advantage of lower interest rates or more flexible terms. However, this option could cost more in the long term versus a home equity loan.

 

  • Home Equity Loan: A home equity loan allows you to borrow a portion of your equity. With this type of loan, you are given the lump sum all at once to use however you wish. This is an ideal option for large projects where you know the final cost, such as putting in a swimming pool or remodeling your house.

 

  • Home Equity Line of Credit (HELOC): A home equity line of credit is similar to a home equity loan, with the primary difference being how the funds are dispersed. With a HELOC, you are given the funds as a line of credit. While the full line is available for you to use, you only repay what you spend. Likewise, you only pay interest on the amount you withdraw – not the amount you’re approved to borrow. HELOCs provide more flexibility and are ideal for those looking to cover events, such as a wedding, consolidate debt, pay medical bills, and more. Even if you don’t need the money now, it provides peace of mind knowing you have access to low-cost funds should the need arise.

Ways to Use Your Home’s Equity

Tapping into your home’s equity is a great option for two reasons. First, the loans are more economical. Because these are home loans, the terms are longer, which helps lower payments. Plus, since the loan is tied to your home, the interest rates are much lower than unsecured loans, such as a personal loan or credit card.

Secondly, you can use the equity in your home for just about anything, including:

  • Upgrade or remodel your home
  • Make necessary home repairs you postponed
  • Consolidate high-interest debt
  • Pay for events, such as weddings and bucket-list vacations
  • Cover medical expenses
  • Keep it active as an emergency lifeline

One thing to note is that using your home’s equity to improve or remodel your house may boost its value – helping to increase the equity in your home even more.

We’re Here to Help!

With home values up and interest rates remaining near record lows, now may be the perfect time to tap into your equity. Make much-needed home repairs or have it as an emergency lifeline should you need it.

If you’re considering taking advantage of your home’s equity, our home loan experts are available to answer all your questions. Visit us in branch, apply online, or call 410-584-7474 to discuss how you can benefit from today’s surging home values.