In today’s video, Abraham Walker, Your Northern Virginia Real Estate Agent, discusses Home Equity.
Wikipedia defines “Home Equity” as the market value of a homeowner’s unencumbered interest in their real property—that is, the difference of the home’s fair market value and the outstanding balance of all liens on the property.
Simplified, this means that the amount you have paid, that is no longer owed against the home, becomes is your portion of ownership. The bank “owns” the other portion.
In the video, the following sample is given.
The purchase price of a home is $100K, you have paid $20K as the down payment. You have $20K in equity, and the remainder is considered a lien against the property. How does this effect you?
As a seller, you can unlock that equity by selling the home to liquidate the asset. That means that if you choose to sell your home, and you still owe $50K on the property from the previous example, and it sells at a current market value of $115K, you will receive the sales price, less the amount owed on the mortgage, so your net after paying off the mortgage is $65K. That is the equity you held in the home.
You can also unlock the equity with a second option called a HELOC loan, or a Home Equity Line of Credit. This is a loan taken out using the equity in your home as collateral.
In regards to selling to a buyer, you can influence the equity in your home by altering the market value of your home.
The market fluctuates naturally, so as the market values rise, so does the value of your home. This is something you can’t influence directly, but that will affect your equity, as you pay your mortgage and increase your equity, and the value increases, so does your equity.
You can also perform renovations to the property to increase its value. In homes with dated interiors, renovating the kitchen, and bathroom areas create a huge return on investment.
Every monthly mortgage payment brings that balance owed against down and raises your equity.
Things for consideration:
Equity is to some extent considered a liquid asset, but it is not a tangible thing. It is an abstract concept, and it is not concrete. The equity in your home doesn’t become tangible until the home is sold, and that monetary contribution is cashed out.
For more questions about building equity in your home, send us an email. [email protected].
About the Author: The above article was written by Abraham Walker, Your Northern Virginia Real Estate Agent, helping clients market their homes to achieve high sales with a quick closing time is my main priority.
He’s the co-founder of Ask A Walker and can be found on YouTube, Facebook, and HERE on this blog.
Abraham can be reached via email at [email protected] or by phone at (703)539-2053.
He’s happy to answer all your real estate questions.
Thinking of selling your home? Check out 20+ step process to selling your home. Or contact me now to start the home selling process. Same day appointments are available on a case by case basis.
I help people sell and buy real estate in the following Northern Virginia area cities & neighborhoods: Kingstowne, Island Creek, Cameron Station, Overlook, Alexandria, Old Town, Belle Haven, Fort Hunt, Mount Vernon, Springfield, West Springfield, Burke, Lorton, Woodbridge, Lake Ridge, Manassas, Annandale, Fairfax, Arlington, McLean, Reston, Herndon and of course Vienna.