Understanding home equity is a key part of understanding home loans on the whole. This video explains what home equity is and how to access it when you need it.
Equity is shares of a home that you actually own. When you initially buy a home, you will probably take out a mortgage to help you out.
Say you buy a house worth $500,000, and you owe the bank $400,000. The equity, or shares of the home that you own, is the total value minus the amount you owe the bank, or $100,000.
You cannot always access all of that equity. This is because the bank won’t let you borrow for 100% of the property. So if you borrow 90% from the bank, which is the typical allotment, and you’re home is worth $500,000, that means the bank lent you $450,000 for the home, so you can only access $50,000 of the equity.
You may want to access your equity if you want to do renovations, buy a new car, or even just go all holiday. Speak with your bank in order to figure out how much of your equity is available to use.
To learn more, click on the link to the video above.