October 5, 2014 Admin | October 5, 2014 When someone states they have $30,000 in equity in their home, what are they referring to? How can this fluctuate?
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The equity in someones home can change depending on home much that individual has payed off on the mortgage, the equity will increase if you pay more off of the house, while the overall value of the house will change with the market prices, causing the value of the home to change and the percent that has been payed off will stay the same but the value of that payed off part will not, you can also lose equity if you take a second mortgage out on your house.
Well said, Garrett. Let’s review.
Equity is the money you have saved up in the walls of your home. If your home is currently worth $200,000 and you owe $140,000, then the equity you have is $60,000. But that can change based on market conditions.
That $200,000 value can drop to $180,000 and that in turn would drop your equity down $20,000 to $40,000. The opposite can happen if the market value of your home takes a big turn upward. Also, as Garrett stated, taking out multiple loans using the collateral of your home can reduce the equity because those loans will have to be repaid when you sell one day.
Bottom line? You can gradually build up equity in your home over time by getting a good value on the home you buy and then staying put for a long period of time (over 10 years). Knowledge is POWER. Follow it with action and you can be unstoppable!