Real Estate and Home Equity

Turn on the television or radio, and there's a good chance you'll hear something about refinancing a mortgage or using home equity to boost your finances. There's also a good chance that you are slightly confused about the entire concept of home equity. Though the technical management involved in managing real estate and home equity may be complicated, understanding the relatively simple concept at its base can help you get a grasp on something which may be very helpful to you financially in the future.

What is Equity?

Equity, simply put, is the difference between how much you owe on your home and how much the home is worth on the market. If you are a homeowner, the amount of money you owe is usually determined by how much of your mortgage has been left unpaid, added to any other debts on the property. For example, if you have a house worth $100,000 on the market with only $50,000 left on the mortgage, the difference in amounts means you have $50,000 in wealth just sitting in the ownership of your home, waiting to be tapped into.

Home equity increases in two ways. The first is by paying mortgage - as the debt you owe on your home decreases, your equity increases. Equity also rises as home values rise; if a the market value of a property increase through appreciation or other factors, the equity in that home increases proportionally.

The first step to building home equity is buying a home; renting space just doesn't cut it. For real estate listings in the Austin area, contact an Austin realtor at the Carvajal Group by calling 512.419.7770.