What is Home Equity and Why is it Important?
February 2, 2021
At Mlend, we understand that buying a home is one of the biggest investments that you will make in your life. Therefore, we are committed to making sure that you feel as comfortable and prepared as possible when making such a life-changing decision.
One of the many terms that is important to know when buying and owning a property, is home equity. Equity is the difference between the amount of money you owe on your home and its appraised value. This amount can fluctuate as you pay down your mortgage or as the home’s value changes. As a result, it is important to periodically review the value of your home’s equity.
Equity can be important for a variety of reasons. The monetary value of the difference between what you owe and what your home is worth allows you to take advantage of the financial rewards of your home as an investment. By getting a cash-out refinance loan, you can draw on your equity to consolidate debt or complete a renovation on your home. The equity in your home can also be used as a down payment on another property. It can make your dream of a vacation home at the beach a reality or help fund a home for your college age children to live in while they are in school. This is what can make equity one of the greatest advantages to owning a home.
It is important to note that building equity takes time. The more you pay on the principle of your home the faster the equity can grow. Whenever you make an extra mortgage payment, it is like contributing to an account that can be drawn on to help meet your future financial goals. Finally, keep in mind that when interest and refinance rates are low, you may be able to maximize the benefits of your equity.