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What is home equity?

Posted by Hanscom Federal Credit Union on Nov 21, 2016 3:25:20 PM

House on Money.jpgHome equity is the difference between the appraised value of your home and any current mortgage balance(s). For example, if your home is currently appraised at $325,000 and you owe $200,000 on your mortgage, your home holds $125,000 in equity. As the value of your home increases and you continue to pay down your mortgage, the equity in your home increases.

Recent rising residential real estate values are pushing home equity totals to record levels, opening up a fresh source of revenue for many homeowners. The Washington Post reports that total home equity in the United States surpassed $13 trillion in early 2016, more than double what it was in 2011, and Forbes.com reports that the average home equity available for over 37 million American borrowers is $112,000.

As home equity values increase, homeowners are borrowing against the equity in record numbers. In fact, NerdWallet reports that lenders handed out $156 billion in home equity lines of credit (HELOCs) in 2015, a 24% increase from a year earlier and a 138% rise from 2010. The most common reasons cited for borrowing include: home improvements, debt consolidation, emergencies, college costs and retirement.

If you are considering borrowing against the equity in your home, do your homework. There are several ways to tap into home equity and some important questions to ask before deciding the best way for you. This information is just some of what’s included in Equity Edge: Answers to Commonly Asked Questions, a free offering from Hanscom Federal Credit Union to help you make an educated decision.

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