Understanding home equity is a important aspect to knowing about home loans as a overall. This video describes what home equity is and how to access it should you require it.
Equity refers to the ownership of shares of a house you own. When you initially buy a house, you’ll probably get a loan to help you out. Imagine you acquire an $500,000 home and are owed $400,000. Equity, also referred to as the shares you have in the property, is equal to the property’s total value less the amount which you owe to the bank. The amount would be $100,000.
The property cannot be accessed in all of this capital. This is because the bank will not let you borrow 100% of the house. If you took out a loan for 90% of your house from the bank (the most common allotment) when the property is valued at $500,000 that could mean that the bank loaned you $450,000 to purchase the home. You can access only $50,000 equity.
It is possible to tap your equity to do renovations, buy an automobile, or perhaps just take a trip for a holidays. Consult with your bank an effort to find out how much equity is available to use.
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