How Much Equity Do I Have?
Once you get an idea of the power of your home’s equity, you’ll realise that you can potentially achieve a lot of financial goals. The first step is determining how much equity you have access to. Dom Cassisi from Funding Options explains how you can do that.
Equity: The Definition
As we discussed in a recent blog, equity is simply the difference between your home’s present market value and whatever you have left to pay off on your loan. If you could sell your house right now and use that money to pay off the mortgage, that would be the equity you have right now.
Determining How Much Equity You Have
You can ask your loan provider to give you the calculated ‘pay out’ quote. This states the exact amount you have left to pay off on your loan.
Next, look into finding out the market value of your home (at Funding Options, we can help you with this). You could just get a rough estimate by seeing what similar homes in your area are selling for. But to find out exactly what your equity amount is, you’ll need a specific quote from an independent evaluation of your home.
The maths involved in putting the numbers together is quite simple.
Most banks will let you access as equity an amount that’s 80 percent of your home’s value minus whatever you still owe on it.
As an example, let’s say your home is presently valued at $500,000. You still have $200,000 to pay off. 80 percent of that $500,000 value is $400,000. Take away that $200,000 you still owe, and you’re left with $200,000 in usable equity.
Accessing isn’t about claiming free money. You’ll still owe the bank for what you use. In fact, if you want to access more than what your bank generally allows, you’ll have to pay for Lender’s Mortgage Insurance.
The Potential of Your Equity
Did you know that you can use the equity in your home to buy or finance an investment property? You could actually even use your equity as a line of credit, if you wanted to. Tapping into your equity can be helpful when it comes to making major renovations.
As you explore your equity a little further, you’ll see how it can grow with frequent mortgage payments and improvements to your home.
For more information about how much equity is in your home and your possibilities, get in touch to arrange a free, no obligation consultation with our team of experts here at Funding Options.
– Dom Cassisi, Managing Director