You've likely heard the term "home equity," but do you know exactly what it is, and how you can use it? Cyprus Credit Union's David Sant explained it this way:
"Equity is the amount of your home that you own," he said. "For example, say your home is valued at $200,000. With a $40,000 down payment (20%), that is what you own when you move in. Every payment you make increases your equity.While living in your home, if the value increases (let's say to $250,000) then that amount is added to your equity. However, this increase does not affect your monthly mortgage payment. If you decide to sell your home, you can use the equity that you have towards a new home."
David shared even more info for homeowners regarding how they can tap into their home's equity to free up funding for life's expenses.
"There's also a home equity loan, which is when you borrow money using your home as collateral.There are two main types of loans. First, there is a basic home equity loan. With this loan, you receive a lump sum of money. 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."
"There are several reasons people choose home equity loans, the main one being for home renovation.
Besides upgrading your home to make it more comfortable for you to enjoy, the upgrades can raise the home's value which is beneficial if you decide to sell your home at a later date."
"People also use these types of loans for bigger ticket items such as student loans, cars, etc. Home equity loans usually offer a lower interest rate than other loans.Some people are taking out home equity loans to payoff credit cards or other types of unsecured debt because of the lower rate on a HELOC. You can save a substantial amount of money by paying these loans off."
But with the concenience of tapping into your home equity, comes cautions.
David explains, "When it come to your home, don't borrow more than you need, don't go overboard and overspend and don't use your home for an extravagant purchase."
Find more info about home equity loans or lines of credit by visiting the experts at cypruscu.com.