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Funding your Future: How to use home equity

Posted at 2:38 PM, Apr 24, 2019
and last updated 2019-04-24 16:38:06-04

If you`re thinking about taking on a major project, want to go on a big vacation to celebrate a major milestone or looking to remodel your house, you might be worried about paying for it. David Sant from Cyprus Credit Union stopped by and said regardless of what it is, you might want to take a look at home equity.

What is Home Equity?
Equity is the amount left after subtracting the unpaid debt balances on the property from the property's current market value as assessed by a valuation. It increases as the debts are paid off and when the property's value is appreciating. For example, if your home is valued at $200,000 when you buy it and you put a $40,000 down payment that is what you own when you move in. Every payment you make increases what you own.
While living in your home, if the value increases, that increase adds to your equity. It is important to note that the increase will not affect your monthly mortgage payment.

Additionally, if the market crashes, a natural disaster hits or the home is destroyed, there could be no equity in the home.

If you decide to sell your home, you can use the equity that you have towards a new home.

What is a Home Equity Loan?
A home equity loan is a when you borrow money using your home as collateral.
There are two main types of loans. First, there is a fixed rate 2nd mortgage. This loan is the better option when you know exactly how much money you need as it is paid in a lump sum.

The second is a home equity line of credit (or a HELOC) which allows you to pull out funds as needed, similar to a credit card.

What Can This Loan Be Used For? 

There are several reasons why people choose these types loans, the main one being for home renovation. They can also be used for bigger ticket items such as student loans, cars, etc. The money you borrow through HELOCs features a lower interest rate while a 2nd mortgage features a fixed rate.

If you interested in learning more about a fixed rate 2nd mortgage or HELOCs, our advisors are here to help. They can walk you through the process and find the option that works best for you.

If you are ready to apply, or have additional questions about home equity, please visit