Homeownership is often touted as one of the best ways to build wealth in America. So how exactly does owning a North County San Diego home help you financially over time? It allows you to build equity. But just what is home equity, and why is it so powerful? Let’s take a closer look.
Home equity in a nutshell
Home equity is probably a term you’ve heard before, but it may not be obvious what it means. It’s actually a pretty simple concept. Home equity is what you have when you subtract what you still owe on your home from what it is currently worth (NOT what you originally paid). For example, if your North County home is currently worth $400,000 and you owe $300,000 on your mortgage, then you have $100,000 worth of home equity.
How to calculate your home equity
While calculating your home equity seems pretty straightforward, it hinges on knowing what your home is currently worth – not the original selling price. So how do you find out what your North County home is worth? It’s actually very simple! You can go to the Clark & Gilman website, plug in your home address, answer a few simple questions, and in 35 seconds get a comprehensive report about the value of your home. Best of all, this service is FREE and there’s no obligation. Once you know what your home is worth, subtract what you owe on your home loan. What remains is your home equity.
How to use home equity
Now that you know what kind of equity you have in your home, it’s time to figure out how to use it to your advantage. There are many ways that you can use your home equity. They include:
- Funding other projects – Have you been dreaming about making improvements to your home? Or maybe you’re looking for a way to finance your child’s college education? Your home equity can help! First of all, you can apply for a home equity loan that allows you to borrow against your equity. You would then make monthly payments just like you do with your mortgage (these loans are often called “second mortgages”). You can also apply for a cash-out refinance. This lets you refinance your home loan for more than what you currently owe. You’d get that extra money as a lump sum and make monthly payments to repay it. Finally, you can take out a home equity line of credit (HELOC). This works just like a credit card, and you only have to pay back however much your borrow.
- Buying a new house – One of the best ways your home equity works for you is to help you make the down payment on a new home. Your home equity is the profit you will make on the sale, which you can apply towards a new home purchase. This often allows homeowners to upsize without having to take on larger monthly payments.
How to build home equity
Now that you see just how valuable home equity can be, how do you increase it? First of all, paying down your mortgage helps you to increase your home equity. Secondly, making upgrades can increase the value of your home, which will increase your equity. Finally, the passage of time will build equity. While the real estate market has its ups and downs in the short term, in the long term real estate always increases in value. The longer you own your home, the more equity you will have.
Contact the Clark & Gilman Team today
Are you ready to start building wealth through home equity? Then contact the experts at the Cristine Clark & Jamie Gilman Team today at 760-758-1211 or [email protected]. We’re standing by to answer all your real estate questions!