Home Equity - What’s your house worth?
Home equity is a term that most homeowners are familiar with. For those that don’t know what this word means, in simple terms it is the difference in what you originally purchased your house for, compared with what it is currently worth. For example, 10 years ago you paid $200,000 for your house, you paid $35,000 down on the mortgage, which leaves a balance of $165,000. Your house is now worth $250,000. This means that your home equity is $85,000. Most lenders will allow 80% of that value. So, the bottom line is you have $68,000 in borrowing power on your house.
Home equity loans are a great way to utilize this money. At this time, you may choose to add an addition onto to your existing property; maybe your family is growing and you need to add a bedroom and a bath. Another thing to consider is that by adding additions onto your house, you will again increase your home equity. A big benefit of a loan using your house as collateral is a lot of the times it is a tax deduction (you will have to check with your lending institutions).
Another reason people turn to refinancing their home equity is to do debt consolidation. Maybe you have a love of credit cards, and after awhile, if you aren’t very careful, you realize that you have charged much more than you can pay. After awhile, this will bury just about anyone financially if you aren’t careful. A consolidation loan may be an option for you.
A great source of information is on the Internet. There are many www addresses where information can be gleaned on how to best use your home equity. You can request information on different programs they offer and get a variety of financial lenders to choose from online. Each lender will offer a different rate for each loan. There are fixed rates, which tend to be the safest. These interest rates will vary every day, so make sure you continually check. There are also adjustable rate loans that will start out much lower than fixed, but have the potential to rise over time. Most of these sites also offer calculators to help give you an idea of what a payment will be using your home equity.
Once you have chosen a lender, you will need to fill out an application for your home equity loan. Once, completed, they will request an appraisal of your house and much other information on all of your accounts. Once approved, and papers are signed, you will be able to pay off debt, or build that dream room!