What is home equity?
Home equity is the part of your home that you own outright. In other words, it is the difference between the appraised value and any outstanding mortgage balances(s). For example, if your home is worth $150,000 and the principal balance remaining on your mortgage is $100,000, then your home equity – the portion of your home that you own – is $50,000.
Home equity is the amount of money you have already paid against the value of your home. A simple formula for determining your home equity is to subtract the amount of the mortgage balance from the current fair market value of your home. In other words, your equity increases as your mortgage balance decreases. If your home has been appraised for $200,000.00 and you owe $125,000.00 on your mortgage, your equity is $75,000.00. Actually, there is a bit more to it. For example, consider the fact that many homeowners have liens or second mortgages on their homes. These amounts must also be subtracted from the appraised value to determine home equity accurately. Many people put their established equity to work for them. They borrow against it and use the money for improvements to the home, for college tuition for their children, or for things like investments in business ventures such as purchasing additional property. This is typically done through a home equity loan or a home equity line o
