Equity: Homeowner Growth Benefit
Homeowners have the edge over renters, especially when it comes to benefits from making monthly payments. Renters pay landlords without receiving a return on their investment. Homeowners pay their mortgage each month and build equity that can be used to make improvements on their homes, among other options.
When you pay your mortgage each month,
you add value to your home in the form of equity.
How to Acquire Home Equity
You’ll build up equity when you purchase your home with a 20% down payment and as you pay down your mortgage. To determine how much equity you have, subtract the balance of your mortgage and any liens from the current market value of your home. Once you’ve built up equity in your home, you can use it as collateral to secure a home equity loan or line of credit (HELOC).
Secure a Loan With Equity
If you’re sitting in a good financial situation and have a consistent job and income, you’re in an excellent position to use home equity for home improvements. Home equity loans usually have low, fixed interest rates making them appealing to homeowners who wish to make home improvements. Want to remodel the bathroom? Consider using some of the equity in your home to secure a loan.
Buy a New House With Equity
In a home seller’s market, where your property value is highest, your home will appreciate, boosting your equity. In other words, when there are few homes for sale, there is competition among buyers, which pushes up the value of your home and, therefore, your equity. Homeowners can leverage the equity in their homes to buy a new house. Then, as your new investment appreciates, the value of your home will continue to increase and be reflected in equity.
In a seller’s market, you can sell your house at a high price and
use equity to purchase a new home.
States With Highest Home Equity
According to CoreLogic, the states with the most significant gain in homeowner equity are Hawaii, California, and Washington state. The same study revealed that the average homeowner gained over $55,000 in equity over the past year. The top states with home equity growth, as of the 4th quarter of 2021, are illustrated in the following chart:
Amount of home equity gain in the top 9 states in the U.S.:
Montana: $71 K
As you can see, owning a home provides you with equity as you pay off your mortgage. Use the equity in your home to secure a loan for home improvements or towards purchasing a new home. Step away from renting and talk to your real estate agent today to find a home to buy so you can earn equity too.
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