According to the United States Census Bureau, the homeownership rate for Americans at the close of 2017 was at 64.2%. With over half of the country owning their own homes, understanding how to make the most out of homeownership is more important than ever. Homeowners can do more with their homes than simply live inside of them.
If you put a substantial down payment on your home purchase, have been making mortgage payments for quite a while or own your home outright, then you have home equity, and there are lots of ways you can use the equity you have in your home to your benefit.
What is Home Equity?
Home equity is the amount a homeowner has paid toward the purchase against the property value. The property value would include any improvements you’ve made to the home or any housing market changes that affect the property value. If you purchased your house with cash, then you have 100% equity. If you took out a loan, then your equity will equal the amount of your down payment plus the total you have paid on the mortgage's principal balance. To determine how much equity you have in your home, subtract the current mortgage balance from the appraised market value.
How Can I Benefit from Equity?
Now that you know the answer to the question, "What is home equity?" you can use your equity to take out a home equity loan. These proceeds can be used for any purpose. Borrowers take out home equity loans to cover large expenses such as tuition, medical bills, vacations, new car purchases, significant home repairs or even to improve their overall financial health by consolidating high interest debt.
To abide by Texas lending laws and regulations, the total amount of all mortgages taken out against a home cannot exceed 80% of the home's appraised market value. The government regulates the loan-to-value limit in order to protect both the economy and to safeguard borrowers from becoming underwater (owing more than the property is worth) on their houses.
Download our free eBook -- The Complete Guide: All You Need to Know About Home Equity Loans
Flexible Lending and Personalized Service
At America's Credit Union, we offer flexible loan terms and creative financing options. In addition:
- We service our loans in-house, so you can work with the same ACU staff throughout the life of your loan
- There’s no application fee, so applying is risk-free
- Closing costs are minimal
If you think a home equity loan could improve your financial outlook, we encourage you to make the most of homeownership by visiting with a knowledgeable mortgage lender at America's Credit Union today.
How to Calculate Home Equity Percentage and What to Do Next
How Much Can I Borrow?
HOME EQUITY LOAN-TO-VALUE RATIO CALCULATION
Use this worksheet to determine how much you might be eligible to borrow.
| Current Market Value of Your Home (from tax statement or appraisal) |
$_______________________ |
| Multiply by 80% (Texas residents) |
$_______________________ |
| Subtract the Balance of Your Mortgage | $_______________________ |
|
Subtract the Balance of Any Other Liens Against the Property |
$_______________________ |
Note: The minimum amount you can borrow is $25,000
(For Texas residents only)
What to Do Next: Leveraging Your Home Equity
Now that you know how to calculate home equity percentage, you can determine whether or not you might qualify for a home equity loan, which you could use for education costs, medical bills, home repairs or debt consolidation.
In Texas, finance regulations and laws allow mortgage lenders to lend a total of up to 80% of a home's appraised market value. This means that if you have more than 20% equity in your home, you might be able to qualify for a home equity loan.
Applying for a Home Equity Loan with America's Credit Union
If you have equity in your home and think a home equity loan could improve your financial situation, we encourage you to visit with a mortgage lender at America's Credit Union. We offer:
- Flexible repayment terms
- In-house loan servicing
- No application fee
- Many more benefits
Sources
- The United States Census Bureau. (2018, January 30). QUARTERLY RESIDENTIAL VACANCIES AND HOMEOWNERSHIP, FOURTH QUARTER 2017. Retrieved April 3, 2018, from https://www.census.gov/housing/hvs/files/currenthvspress.pdf
- Investopedia Staff. (2017, December 18). Home Equity. Retrieved April 04, 2018, from https://www.investopedia.com/terms/h/home_equity.asp
- Larson, A. (2017, June 18). ExpertLaw. Retrieved April 04, 2018, from https://www.expertlaw.com/library/finance/Texas-home-equity.html
