Explaining Home Equity
Posted by Judy Orr on
What is the definition of home equity?
The total amount of your outstanding mortgage(s) deducted from the current market value of your home appears to be a relatively straightforward computation. Here's an easy example:
$525,000 = is the current market value of your home
$225,000 = what is still owed on your mortgage
$300,000 = your equity in the home
The loan balance, which appears on the monthly mortgage statement, is one side of the equation that is factual. The second side is less obvious: your home's current market value. Until the home is listed on the market and you receive an offer, a market value is only a guess.
When you make a home purchase, your down payment creates the initial equity of your home. Every mortgage payment you make…
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This is part 2 of the Real Estate Neighborhood Expert series – click the link to see what started these posts. In a nutshell, this series began from an article I read in Inman News. The author was blasting agents that call themselves area experts. His thoughts were that these so-called experts would take high-priced listings because they weren’t keeping abreast of local market conditions. I commented on his post and wrote my own response, which you can read using the above link. That post is very long so I’m going to create some shorter posts to highlight specific things referred to in the Inman article.
When I saw the heading of the article I found online I couldn't wait to click on it. I get so many buyers that have been pre-qualified by their personal bank. A few buyers received a financial benefit from using their banks, like a lower interest rate or closing cost help. But most do not. In fact, many buyers go to one of the big banks because they don't realize there are other financial options.
Are you a recent grad thinking about buying your first home? Tread carefully. Although the historically low rates for a home may give reason to salivate, you want to take a closer look. With the FED’s plans to slow down the “quantitative easing” (QE3) over the next year as announced last month, we may soon see long-term interest rates going up. It may seem like a good idea to jump on the low interest rates before they go up. However, if you have student loan debt, it is critical that you consolidate your loans now. With that said, here are some considerations to ponder before buying your first home.
