In simple terms, home equity (sometimes called “real property value”) is the measure of the true financial value of your property investment. It’s calculated by taking the difference of the fair market value of your home and what’s still owed—including the balance left on your mortgage plus any property liens it may have. Your home equity increases as you pay down your mortgage, as well as when the fair market value of your property goes up. Your home equity decreases as the market value of your home drops, or when you have a lien applied against your property.
In recent years, many Americans have watched the equity in their homes disappear with the collapse of the real estate market in the U.S. As your property value decreases so, too, does your home equity. However, while the situation in the short-term may make it seem like you’ve lost all the equity built up on your investment, understanding home equity and how to use it to your advantage can ensure you still see a healthy return on your investment.
HUD-certified housing counselors can offer insight and answer any questions you have about your home equity. Give us a call at 1-800-990-9838 and let a trained housing counselor help you understand, use, and protect the equity of your most vital financial investment.
Reverse mortgage counseling is a special home equity conversion program HUD offers to seniors age 62 and over. A reverse mortgage can be a highly beneficial way for seniors to get money out of their investment without risking their home. However, there are a number of financial implications to be aware of before you decide if a reverse mortgage is right for you.
A home equity loan (also called a home equity line of credit) is a secured loan you can take out to consolidate your unsecured debts, such as credit card debts. While a home equity loan may be able to help your finances in the short-run, there are certain risks to consider before you risk your home to ease your financial burden in the here and now.