Every month you make your mortgage payment, you build equity in your home. It’s the main argument for renting vs buying. You make a payment that goes toward ownership of your home. Not everyone knows how to calculate equity, so here is how to determine your home equity to save money on your mortgage.
At its heart, equity is the value of an asset, minus the liabilities stacked against it. That’s it. It’s your house’s value, minus what you owe. That’s why it’s important to keep an eye on your home’s value as it evolves. Generally, a home’s value will appreciate steadily unless something catastrophic happens or the upkeep isn’t handled on the property. If you own a home, you can assume that your home will increase in value from what you purchased it for.
So if equity equals assets minus liabilities, you should be able to quickly determine the equity in your home. The toughest thing to determine is your current home value. You have to do some homework. Check what the home values around you are. There are online tools that will give you a good estimate on the value. You can pay for an appraisal if you really want to, but if you refinance, your mortgage company will do that for you.
Then, take what you still owe on your mortgage, every penny including interest, and subtract it from your value. That gives you the equity you have in your home.
I know what you’re all asking. How does this save us money? Your equity can save you money in a lot of ways.
The first way is with a refinance. Do you have more than 20% equity in your home? You can refinance to a lower rate and get rid of your PMI (Private Mortgage Insurance) if you’re currently paying it. That alone can save hundreds of dollars a year.
You can also do a Cash Out Refinance. This is a way to use the money you’ve paid into your home to pay off other bills, like high-interest credit cards and other bills. Cutting those out of your life will save you money every time.
If you want to talk about how your home equity can save you money, call us in St. Louis at (314) 781-9700, Chicago at (773) 770-4727, Indianapolis at (317) 550-1515 or Nashville at (615) 810-8555. You can always apply online at www.thehomeloanexpert.com, and we’re also open on Saturdays to better serve you. We work hard to make it easy on you. Nobody gets lower rates on better loans than The Home Loan Expert, Ryan Kelley, why go anywhere else?