how equity works
How equity works
If you buy your house for $200,000 and you put $100,000 down and have a $100,000 mortgage, your equity is 50%.
If the house is reappraised at $250,000, your equity with the same mortgage increases to $150,000 or 60%.
But, if the house is reappraised at $150,000, your equity with a $100,000 mortgage decreases to $50,000 or 33%.- posted by Mark Pane @ 10:06 PM 0 comments
What is equity?
When you make a down payment on a home, the amount of the payment determines your equity, or the percentage of the property you actually own. The more you put down, the greater your equity.
As you pay off the principal on your mortgage, your equity in the home increases. When your mortgage is fully paid, your equity is 100%. The home is yours free and clear, and you get the deed, or legal title, to it.
How value changes equity
The amount of equity you have in your home may not increase regularly as you pay off your mortgage. That’s because equity is determined in relation to the value of the property — and the value will change continually for as long as you have your mortgage. If your home is reappraised at a higher amount than your original purchase price, the dollar value of your equity increases. Likewise, if the house is reappraised at a lower amount, your equity decreases.
Property values change regularly, sometimes dramatically. Even if you’ve taken good care of your property, a sluggish economy, high interest rates, or changes in your neighborhood can have a negative impact on the value of your home. The intrusion of a superhighway, an airport, or some other large construction project can detract from the home’s appeal to future homebuyers.
Location, location, location
While you can’t prevent change, many experts advise buyers to consider the location of homes they’re interested in at least as carefully as they consider the homes.
- posted by Mark Pane @ 7:05 PM 0 comments
