Home Equity Loans Explained

source:  www.guilfordmortgagect.com

source: www.guilfordmortgagect.com

If you’ve owned your own home for several years, the chances are that your property has increased in value at the same time that your mortgage has reduced.  This equity in your home can be a potential gold mine because you can borrow against it to invest, allowing you to harness your home’s financial potential.  Many people get nervous about ‘betting the house’, and this strategy isn’t right for everyone, but in the right circumstances it can significantly increase your wealth over the long term.

Home Equity Loans

Home Equity Loans allow you to access the equity in your home even if you’re not yet ready to sell.  A lender will loan you a proportion of your home equity which you can use to increase your investment portfolio, to renovate or improve your property and increase its market value, consolidate your debts, or even start a business.


Understanding equity

The ‘equity’ in your home can be thought of as the profit—the difference between how much your property is now worth, and how much you owe on your mortgage.  If you have owned your home for many years, your amount of equity has the potential to be in the hundreds of thousands.

An Example—Home Equity Loans

Kate owns her own home.  She purchased it 15 years ago for $300,000.  Over that time she has worked hard to pay down her mortgage which is currently at $75,000.  In addition, the values of homes in her area have increased substantially over that same timeframe.  Her home has been appraised at $700,000.  The equity in her home would be $625,000— the current value ($700k) minus the current balance of her loan ($75,000).  Kate obtained a loan for $500,000 (80% of her equity) which she used to add a second storey to her home and increase its market value.


The potential benefits of Home Equity Loans

Lower interest rates:  Generally, home equity loans offer lower interest rates than other types of investment loans.  Because the loan is secured by your home, these types of loans are considered less of a risk to lenders.

Tax deductable interest:  Often the interest associated with home equity loans have the added benefit of being tax deductible.  This can help you maximise the financial benefit of investing.

Put your home equity to work:  Many homeowners with equity do not harness this investment potential.  Home equity loans can help you to unlock the added value to your home without having to sell.


Source:  http://www.financial-planner.com.au/2012/01/home-equity-loans-explained-unlocking-the-investment-value-of-your-home/

Greater Pensacola, FL Real Estate Experts – Making It Happen for Buyers and Sellers!

Grand Realty is a greater Pensacola real estate company that opened its doors in June of 2003. We strive to help all of our clients with their individual real estate needs, whether it’s buying a home in Pensacola FL and the surrounding area or selling their existing Pensacola property.

We have approximately 30 agents with a wide range of specialties that include:

  • Pensacola new home buyers
  • Pensacola short sales
  • Pensacola Foreclosures
  • Pensacola Investment properties
  • Pensacola commercial properties
  • Pensacola vacant land
  • Pensacola water front properties

Grand Realty is also proud to say we have bilingual agents who speak Spanish and Chinese. These agents are located throughout the majority of Northwest Florida including Pensacola, Milton, Pace, Navarre, Perdido Key, Jay, Cantonment, Gulf Breeze, and Navarre. The Broker of Grand Realty is also licensed in Alabama. Please feel free to email or give us a call, and from everyone at Grand Realty, thanks for your business!

Grand Realty 3806 Hwy 90, Pace, FL 32571 Office Phone: 850-512-1185 Office Fax: 850-512-1195 Email: Office@GrandRealty.net

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