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How to Get the Most from Your Home Equity

Why is Home Equity in Arizona Important?

Some people are able to save their money for a rainy day and use their home equity to fund an education, but many others are not yet in that position.

A home is a major investment, and many people invest in their homes with the intention to sell it at some point. So, if you were to find yourself in a situation where you needed to cash out quickly, your home equity would play a major role. But what if you didn't have any equity? The truth is that most Americans don't have enough of these funds put away. 

Home Equity is important for retirement planning

Some financial advisors believe home equity is a great investment for retirement. It is a financial asset that will grow over time and provide security during your retirement years.

For some people, a retirement plan might not be as important as planning for home equity. They may have a built in retirement or pension.

How do I Calculate my Home's Equity?

Equity is based on the difference between your home's market value and your mortgage balance.

This equation is used to determine the equity you can withdraw from your home loan:

(Home Value - Mortgage Balance)  ÷ (Loan-to-Value Ratio X 100)

When the equity in a property reaches 50% or less, it is considered "underwater". At this point, one can no longer withdraw equity. However, there are other options such as refinancing that may help remove some of the debt from the borrower.

The amount of wealth Americans have built in their homes has increased astronomically.

The total net worth of American households has increased dramatically since the 2000s. This increase can be attributed to a number of factors including economic growth, changes in tax policy, mortgage rates,  and technological innovation. Americans now have more wealth stored in their homes than ever before.

Using Home Equity To Purchase Another Home

The reason for this is because you might not be able to sell your current home for the price that you need it to be sold at. Or they want to take the time to purchase first then sell. Using home equity might be a good way to finance your next purchase.

The process of using home equity as a form of payment starts by looking into what other homes are on the market, and then finding one that you want. Once you find a house, you will go through the steps of inspecting it and making an offer on it. Once an offer has been made, an appraisal will be done on the new property in order to see how much worth it is.