There are a variety of advantages to buying a home, and a big one is the ability to build equity.
In simple terms, home equity is the difference between the current value of your home and the amount you still owe on your mortgage.
Your equity starts building from the day you make a down payment on your home and it grows as you continue to make your monthly mortgage payments. It will also rise if the assessed value of your home increases, or if you make improvements that raise the home’s value.
Think of it this way, if you buy a home for $200,000 and make a $10,000 down payment, you have already built $10,000 in equity. Then, each time you make a mortgage payment you’ll reduce the amount of your loan and build your equity.
That equity will also grow if the price of your home rises. So, if the value of your house jumps to $300,000, you will have an extra $100,000 in equity.
The more equity you have in your home, the more money you will have when you decide to sell it, but you’ll also have other options to take advantage of that extra value.
A home equity loan or home equity line of credit can give you the ability to borrow money based on your current home equity so you can do things such as make home improvements or repairs, or even pay college tuition. If you elect to take advantage of either of these methods, just keep in mind that you’ll need to repay the money.
Stop in to talk to us about home equity, or if you’re interested in discussing the possibility of a home equity loan or home equity line of credit. We’ll be glad to explain how each works so you can determine what might be best for your needs.