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    7 Important Things to Know about Home Equity

    As a homeowner, your house is more than a place to live. It can easily become a good investment for you and your family, too. Not only are your payments going towards a home that shelters everyone and everything in your household, but the equity it builds can be used in the future. In order to understand this concept more, I’ve compiled a list of 7 important things to know about home equity.

    Important Things to Know about Home Equity

    Home Equity 101

    Essentially, home equity is the value of your home beyond what you owe on your mortgage or what you paid for your home. It’s the difference between what you owe and what the home is worth.

    1. How to Establish Equity Often, maintaining your home well, paying your mortgage on time, and simply living in your home for a number of years, will be enough to create equity in your home. It will greatly depend on the town or city in which you live, what you paid for the home, how long you have lived in the home, and the current real estate market. But often just enjoying your home longer and taking good care of it simply increases your chances of positive equity results since property values typically rise steadily over time.
    2. Investment When you decide to sell your current home, your equity can assist with your next home purchase and even better loan terms since your equity likely gives you a way to put more money down.
    3. Lower your Interest Rate If you have 20% equity or more in your home and it is a good time to refinance to get a lower rate, that equity can be encouraging for your bank or mortgage supplier. They are more likely to refinance to a more favorable rate when you have stronger financial resources backing you.
    4. Remodel or Put on an Addition Home equity can launch your home improvement projects and propel your out-of-date home into an updated contemporary residence. It’s important to note that your loan payments will go up if your loan increases. But if you use this option strategically, you can remodel a home to your liking and needs to live in for longer.
    5. Consolidate Debt Using your home equity to pay off existing obligations can help you lower the rate on the debt you owe and combine your bills into one charge. It’s important to note, the interest rate on a refinance option should be lower than the current debt interest rate to make this move a positive one.
    6. Buying Another Home This can be a viable option for many people who want to purchase a second home in a vacation destination or as a rental. The equity earned on your current home can be used for purchasing a second home without moving. This can be a powerful way to invest funds that might otherwise sit untapped. Leveraging the equity can help you build your rental business or fund a vacation retreat.
    7. Eliminate PMI The insurance you need to pay for when you get a mortgage with less than 20% down is called private mortgage insurance. This gives banks security on your mortgage, but it costs you a fee every month. Once your home has enough equity accrued, you can request a review from your lender and eliminate those PMI charges.

    Why is it Important to Understand Home Equity?

    Having a valuable asset like home equity can be a vital contribution to your life. Using the knowledge you have, increasing your home equity, and leveraging the funds you’ve acquired properly, can be highly beneficial to your prosperity in life.

    Reviewing what your home is worth and comparing it to other homes in your area is necessary to keep your sights on the pulse of your home’s market value. What is happening in your local real estate area can help you develop options for your home’s equity or stay on your journey and watch your home’s value increase.

    Working with an Experienced Memphis Area Real Estate Agent

    When it’s time to sell your existing home or buy a great new place, turn to a highly regarded and well-informed local real estate agent. You want someone who you can trust to give you the best advice and know-how for your new home purchase or sale. Check out my other great real estate articles to help you through your home selling and buying experience here in Memphis. Staging homes for sale is also part of my expertise. Please ask me about it when you reach out.

    Take a minute to learn more about me. With over 19 years of top-notch service for my clients, I can guide you with your house sale, new home purchase, or buying a great parcel of land. As a top, licensed real estate agent in the Memphis area, showing you the best properties for you and your family is my goal!

    Contact me at (901) 828-8919 or drop me a quick note at angie@angiekelley.com and we can speak in person about your plans and options.

    Angie Kelley, Crye-Leike Realtors
    (901) 828-8919 or (901) 756-8900