Homeowners gaining access to more equity
Has your home’s equity grown? Then you’re not alone. According to a recent story by the Chicago Tribune, a growing number of U.S. homeowners are seeing the equity in their homes rise. And that’s good news.
Building equity is one of the biggest positives of owning a condo or single-family home. That’s because you can use that equity — getting to it with cash-out refinances, home equity loans or home equity lines of credit — to cover everything from paying down your credit card debt, helping your children pay for their college educations or a massive kitchen remodeling project.
What is equity? It’s the difference between what you owe on your mortgage and how much your home is worth. Say you owe $150,000 on your Chicago condominium. If that condo is now worth $300,000, you have $150,000 in equity.
You can then turn to a refinance or home equity loan to nab a portion of that equity, which you can spend on whatever you like.
The Chicago Tribune story pointed to numbers from the Federal Reserve showing that U.S. homeowners today have a total of more than $14.4 trillion in equity. That figure increased by about $1 trillion in 2017.
Of course, you can’t use all of the equity in your home. As the Tribune story says, most lenders require that that your total mortgage debt secured by your home not equal more than 80 percent of the property’s value.
When you are ready to access equity, you’ll have to determine which product – cash-out refinance, home equity loan or home equity line of credit – makes the most financial sense for you. Determining this isn’t easy, and requires a consideration of everything from your FICO credit score to how you want to spend the money.
My advice? Talk with your mortgage loan officer. This professional will help you determine the absolute best way to tap your home’s equity.