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What is Home Equity?
By Susan M. Keenan
The equity of a home is calculated by taking the current market value of a home and subtracting the debt owed on the property. For example, the current market value of the home is $250,000 and the current amount of money the homeowner still owes to his lender is $115,000. If you subtract the debt of $115,000 from the market value of $250,000, the home's equity is $135,000.
Since the initial down payment builds up equity in the property, the larger the down payment on the home, the larger the amount of equity in the home. In many cases, a larger down payment will equate to a better positioning stance for acquiring a loan as well.
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Most often, the home and its accompanying land and structures are used as collateral to secure the mortgage. The value of the property is used to ensure the lender that he will not lose his investment.
Once a homeowner has lived on the property for several years and paid into the home loan or mortgage, the equity of the property increases according to the amount of each monthly payment that went toward the principal portion of the loan. If more than one loan has been taken out using the home as security for the loan, the balance of each loan must be subtracted from the current market value of the property to obtain the current equity.
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How Much Can You Afford?
Our calculators will help you determine loan amounts, For a free preapproval
mortgage qualification, affordability or whether you of your loan
should be renting or buying. CLICK HERE
Complete the fields below and click Calculate Now.
To view the results of each calculation, click on the
various tabs. To email yourself a copy of the results,
click the Receive this Detailed Analysis link.
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Results
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Receive this Detailed Analysis
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Your Monthly Payments
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Cost of House = [(Monthly income x Debt Ratio) – monthly tax – monthly insurance – condo fee] /
(monthly interest rate/ function of interest rate) |
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How are the interest rates changing?
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If you have been waiting for the interest rates to drop so you can BUY a new home, now is the perfect time! Overall, the rates are lower than they have been throughout the past three years! Don't wait any longer - make your move now before the rates go up again.
As you can see from the graphs, mortgage interest rates have been dropping to their LOWEST in years. Now is a great time to refinance your mortgage before the rates get higher! Lower your monthly payment, get extra cash you need to pay off high interest debt, or finish remodeling your home. Contact me today for a FREE, no obligation personal analysis of YOUR financial options.
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