The Various Methods of Obtaining Home Equity
There are many different ways in which you can create equity in your home. There are many benefits to having equity including additional flexibility when selling your house or using it to secure a loan. Let’s take a look at what equity is and the ways that you obtain it over time.
What Is Equity?
Simply put, equity is the difference between what the home is worth and what you owe on a home loan. Let’s say that your house was worth $100,000, and let’s also say that you owe $50,000 on your mortgage. That would mean that you have $50,000 in equity in your property. If you owed more than $100,000 on your mortgage, you would have negative equity or be considered upside down on your home.
Obtain Equity by Making a Mortgage Payment
You can obtain equity in a home each time that you make a mortgage payment. This is because a portion of each installment goes toward the principal balance on the home. You can also recoup equity by making payments on a home equity loan or line of credit. Generally speaking, more of each payment goes toward the principal balance the closer that you get to paying the mortgage off.
Obtain Equity Through Price Appreciation
You can also obtain equity through price appreciation in your property. Generally speaking, homes increase in value by 1 to 5 percent per year. However, this depends on local market conditions and any improvements that you have made to a home. The unique features that your home has could also result in price appreciation that is higher or local than the local market as a whole. The best loan officers in Las Vegas may be able to provide insight as to how price appreciation may impact your ability to get an equity loan.