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Showing posts from October, 2016

The Home Equity Playbook

What is Home Equity? Home equity seems to be a very simple calculation — the total amount of mortgages owed subtracted from the current market value of a home. Here is a simple example:
Current Home Market Value                $325,000 Existing Mortgage                                $225,000 Homeowner Equity                              $100,000
One side of the equation is well defined, and it is found on the monthly mortgage statement, the loan balance. The other side is less obvious — the current market value of the property.
As a homeowner, your down payment purchases your initial equity, and your monthly (or additional) principal payments increase your equity. In strong real estate markets and in-demand locations, equity can increase quite rapidly as the property value increases, but the inverse can also happen — too much available inventory and market down-cycles can lead to falling home values and a reduction in homeowner equity.
It can be difficult to put an accurate value on som…