A home equity loan is essentially borrowing money from a bank against the equity that you have established in your home. Home equity is the difference between the fair market value of your home and the unpaid mortgage balance remaining. The equity in your home can be used in many ways to increase your standard of living. You can use this loan to pay down debts, acquire assets, or create additional wealth.
If you have an asset worth $1.5 million, and you still owe $750,000 on this asset, then you have an equity of $750,000, or 50%. Simple enough right?
What can you do with this equity? Well, quite simply, you can turn it into cash with a home equity loan! Most banks require you have an equity of around 25% before taking out this type of loan. If your house has been appreciating in value, or you have simply been paying off a significant portion of the loan, feel free to take out a home equity loan and treat yourself to a nice vacation!
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