You’ve no doubt heard that homeownership is a great investment. However, few homeowner’s fully understand why and how and this is especially true when it comes to home equity. For most their home is our largest financial asset, in most cases making up over half of their net worth. But how can you use your home’s equity to your advantage?
According to the Urban Institute in Washington, DC, “Americans have a staggering amount of untapped equity in their homes.” How much? Altogether, $11,030,000,000,000. That’s 11 trillion, 30 billion dollars! And when we say “untapped,” we mean the equity is not currently being used or extracted by the homeowners.
Despite this huge wealth possessed by home owners, it isn’t liquid, or usable– unless you make the effort to extract it. Extracting equity from your home is a means of making this illiquid asset liquid and usable.
Home equity can be both tapped and used in a variety of ways. Which way is most beneficial will depend on the individual circumstances of the homeowner such as age, wealth, financial and family goals, and work or retirement situation.
A recent article from the National Reverse Mortgage Lenders Association titled An Introduction to Housing Wealth: What is home equity and how can it be used, offers great insight into home equity and the myriad ways you can use it.
As the three-part article suggests, home equity can be both tapped and used in a variety of ways. The way you should use your equity will depend on several variables, including your age, wealth, financial and family goals, and work or retirement situation.
Plainly speaking, your home equity is the value of your home minus your mortgage balance. So how can you grow your home equity? Paying off some or all of your mortgage debt, or any other debt you have on the house, will increase the equity in your home. However, this is not the only way for your home equity to grow.
Another way to bump your equity is for the value of your home to rise. Whether it’s from market appreciation or improvements made on your end, when your home value grows so can your equity.
The following infographic, provided by the National Reverse Mortgage Lenders Association, offers great insight into home equity and how you can tap into them.
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If you, or someone you know is considering Buying or Selling a Home in Columbus, Ohio please contact The Opland Group. We offer professional real estate advice and look forward to helping you achieve your real estate goals!
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