There are various ways to take a loan. Your home equity is another solution to borrow money, if you need them. In this article we’d like to tell you more about this.
First of all, let’s figure out, what is your home equity. It is the difference between the market cost of your house and the amount of money, you got for its purchasing. Let’s look at the simple example, in order to get it correctly.
Let’s imagine, that you’ve got $120k in mortgage for buying your new house. After you start living there, the price of the house rised a little, so that now it could be sold for $150k. The diference between these two numbers is equity ($20k). Now you can take another loan in cash, in order to spend this money, let’s say, for your house improvement.
These loans are possible because of that fact, that your house is still a collateral, so that it guarantees, that you will repay the debt. At the same time, its market price grows, which can be used by you, as its owner.
There is one important thing, which is required for taking the home equity loans. The market price of the house you bought should grow or, at least, remain the same. If it dropps, you won’t be able to get any new loan.
You should also take home equity loans if you’ve already repaid some part of your debt. It allows many borrowers to get money for the house repairing and improvements, which automatically increases its value.