As costs increase and the economy teeters in the balance, many folks are starting to take a hard look at their financial situations and ensuring they are in a healthy position for any potential storms that might come their way. This can include a recession, a job loss, etc. In truth, this is a healthy practice and should be done regularly.When it comes to assets, there is usually none bigger for homeowners than their property. If positioned well, your home holds equity which can be leveraged in many ways.
Equity is the balance between the debt that you still owe against your property and the current market value of the home. As you pay down your mortgage, for example, your equity grows. Equity also grows if the real estate market around you grows. Once your mortgage is paid off, you own 100% of the property and have 100% equity.
Why is Equity Important?
Equity is one of the greatest benefits to owning a property. It’s a primary investment tool and once you have a good amount of equity, it can be leveraged in several different ways. For instance, it can be used as buying power towards a new home if you plan to move or downsize in your retirement. You can also borrow against the equity that you’ve built via a home equity loan. These loans can be used for many things, including college tuition payments, consolidating credit card debt, making improvements to your home, paying medical bills, buying a car, etc.
How Quickly Can You Access It?
A home equity loan can move quickly assuming there are no issues with credit, payment history on your mortgage and market value. Once you have that loan in place, you can start using it right away. In fact, it’s possible to sign up for a home equity line of credit before you ever need it as an emergency cash backup so that you don’t have to run through the administrative process during a time of need.
You can also access the equity in your home by refinancing it. A ‘cash out’ refinance essentially allows you to get a check at the closing of your refinance. How much you can get is based on how much equity is in your home, and what your new monthly mortgage payment would be based on the terms of the loan and what the bank believes you are able to afford monthly.
As with any financial decision, it’s imperative to have a competent team of professionals to help guide you in your decision making. A lender, accountant and/or investment professional would be good places to start if you need cash.
Principle Abstract and Settlement Services has years of experience guiding clients through purchases and refinances. We also hold close professional relationships with some of the very best industry professionals in the Bucks and Montgomery County areas. If you are interested in refinancing or learning more about how to tap into your home’s value, give our office a call and a member of our team can assist you.