Knowing how much equity you have in your home may not be something that’s regularly on your mind, but it’s certainly something that you’ll want to check periodically and make sure you at least have an idea of where you stand currently in your mortgage. And even if you are in it for the long haul as far as owning your home or paying down your mortgage, having a keen sense of where things stand could be handy in the near future.
That said, have you checked your mortgage lately to know how much equity you have? Maybe it’s time for an equity check. Here’s what to look for when checking your equity and a few ways it could be useful in the future!
What is Equity?
Before we dive too far in, let’s make sure we all understand what we’re talking about here.
For starters, equity is the difference between your home’s current value and how much remains on your current home loan. Barring some strange circumstances, your equity will grow over time as you both pay down your loan (even with minimum payments) and as your home appreciates in value. That means that adding value to your home will improve your equity over time.
If you’re not sure what your current home is valued at, then you can use websites such as Zillow to give you a reasonable idea of what it may be worth in the marketplace. While Zillow-Esque websites aren’t entirely accurate, they take into account listings and sale prices in your area to calculate the home’s price.
Equity is on the Rise
Equity is on the rise in the United States fueled in large part by a housing market that has seen a boon to sellers due to an inventory-shorted marketplace. Due to fewer homes available in the market and an increasing number of buyers, home prices have skyrocketed over the last couple of years.
A driving force for the equity rise is that many homeowners understand that staying put, at least in the short term, is actually adding equity and thereby wealth to their personal financial portfolios. As a result, homebuyers are able to accumulate free wealth and equity just by remaining in the homes that they currently live in as home prices continue their upward march.
What Can Equity Do for You?
Equity may seem like a somewhat fluffy number we use to dictate just where we stand in a loan or, in the event of purchasing a new home, how much we can put towards a new mortgage. The reality is more complex, though. For homebuyers who may have purchased their loan with a minimum downpayment, 20% equity is often a critical number as this is where private mortgage insurance (PMI) drops off.
Additionally, many homeowners can refinance their current mortgages with options of using their equity for cash-out. In other words, use the equity you have to take cash out, make some renovations to the home (or for your heart’s desires), and theoretically add value back in. More equity, and a larger percentage of it, can be extremely beneficial to homeowners in the near term. You can also borrow against your equity with a home equity line of credit.
Boost Your Equity Faster
One way you can boost your equity faster is by refinancing to a lower-interest mortgage. Take advantage of low interest rates now and boost your equity through Tidewater Mortgage Services, Inc.!
