Home equity is the difference between your home’s value and the amount you still owe on your mortgage.
Example: If your home is valued at $300,000 and you still owe $200,000 on your mortgage, you would have $100,000 in home equity.
You can build equity by either paying down the amount you owe or improving your home’s value. In most cases, you’ll gradually build equity as you make your monthly mortgage payments. But there are also other ways to accelerate equity growth. For example, you can often build equity quicker by paying down your loan faster or investing in improvements that increase your home’s value.
To pay off your loan faster, try making one extra payment per year or pay a little extra each month.
Tip: You’ll usually start with more equity if you have a bigger down payment.
You can also increase your equity by improving the value of your home. This can mean anything from the natural rise in property value as neighborhoods change to home renovations or expansions.
Note: If you borrow against your home equity in order to make home repairs, you’ll be increasing the amount you owe before you increase the value of your home. This may limit the equity you gain from the renovations in the short term, but can still be a good option for long-term investments.
You can put your home equity to make repairs, pay off high interest credit cards, or even to fund retirement. You can also sell your home to use your equity to upgrade to a nicer home. Another great way to use your home equity is to refinance your loan.
Using your home equity to refinance your mortgage can help give you a lot of financial flexibility and get you into a new loan that fits your
current circumstances. Refinancing may help you:
Refinancing options are available with either a fixed interest rate or a variable interest rate. Just like with most interest, a fixed rate will be the same every month and a variable rate could change from month to month. The right refinancing loan for you will depend on your specific situation. You should consult a Loan Officer to get the right information for your circumstances.
Equity is what makes buying a home such a powerful investment. As your equity grows, you gain more financial freedom and increase your spending power. And the sooner you start building your home equity, the more time you have for it to grow.
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by Primary Residential Mortgage, Inc. NMLS#: 919520 Utah DRE Mortgage Office License # 8335595. MLO 0117736. MC3094-122. All loans subject to credit and property approval. PRMI NMLS 3094. PRMI is an Equal Housing Lender. Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice.
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