“Home equity” is, by textbook definition, the difference between the current market value of a home and the outstanding balance of any mortgages or liens secured by the property. In plain English, it represents the portion of the home that the homeowner effectively owns outright.
Understanding your home equity percentage empowers you to make informed financial decisions, manage debt effectively, and build wealth over time. This information is integral to assessing your overall financial position and net worth. Knowing your home equity is valuable; you can make an informed decision to borrow against it or sell the property to realize the equity as cash.
Simple Steps to Determine Home Equity
What follows is a simplified approach to determining your home equity. In order to obtain the most precise picture of your home equity situation, consider ordering a professional appraisal or consulting with a financial advisor.
- Find your home’s current market value.
- You can estimate your home's current market value by using various methods, such as hiring a professional appraiser to conduct a valuation, checking recent sales prices of comparable properties (comps) in your neighborhood, and using online real estate valuation tools or websites (Zillow is a popular one).
- Calculate your outstanding mortgage balance.
- Obtain the most recent statement from your mortgage lender or servicer; it outlines the remaining principal balance of your mortgage(s), including any accrued interest and fees.
- Subtract your mortgage balance from your home's market value.
- Subtract your outstanding mortgage balance from your home's current market value. The result equals your home equity. For example, if your home is valued at $500,000 and you still owe $200,000 on your mortgage, your home equity would be $300,000.
How to Increase Your Home Equity
Home equity can grow over time and your property value may naturally appreciate, but there are strategies you can control to grow home equity more quickly.
- Regular Maintenance and Upkeep: Keep your home well-maintained by promptly addressing repairs and maintenance concerns. Regular maintenance can help preserve the value of your property and prevent more minor issues from escalating into costly problems.
- Home Renovations and Improvements: Invest in renovations and improvements that can increase the value of your home. Focus on projects that offer a high return on investment (ROI), such as kitchen and bathroom remodels, adding square footage, upgrading energy-efficient features, or greatly enhancing curb appeal.
- Reducing Mortgage Debt: Pay down your mortgage principal more quickly by making extra payments or refinancing to a shorter loan term. When you reduce your mortgage balance, you effectively increase your home equity.
How to Use Your Home Equity
Built-up home equity can be a financial tool to help you achieve life goals. For example:
- tackle home improvement projects
- pay off debt
- advance your career or start a business
- fund big purchases (wedding, college, new car, medical bills, etc.)
- supplement retirement income
- down payment on a home
Put your Home Equity to Work and Achieve Your Life Goals with Unison
Unison pioneered the Equity Sharing Agreement to help empower homeowners with greater financial agency and flexibility. The innovative alternative to traditional borrowing features a structure with zero interest and zero monthly payments. Instead, you share a portion of your home’s future change in value. In the long run, it may be more or less expensive than a traditional loan, depending on how much your home appreciates in value. But for many homeowners, the option to avoid more debt and more monthly payments makes equity sharing an alternative worth looking into.
The Equity Sharing Agreement features:
- Zero Payments: Access your equity without any monthly obligation
- 30-Year Term: Extended timeframe for reaching your financial objectives
- Remodeling Adjustment: Eligible to keep the value you create through property improvements
- Improved Cash Flow: Keep more money in your pocket each month
- Investment Opportunities: Use freed-up cash to invest elsewhere
- Debt Consolidation Power: Effectively streamline your finances
While every homeowner's situation is unique, Unison's Equity Sharing Agreement opens up exciting new possibilities for those seeking to leverage their home's value. If you’re interested in accessing your equity with no debt and no monthly payments, learn more about Unison’s revolutionary approach to home equity today.
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