How To Establish How Much Equity Is In Your Home?

Most long-term decisions in life require a large amount of money. While in some cases the funds that you have in your savings accounts may be enough, it can be difficult to find the money that you need for large expenses. This is where having a lot of equity in your come is very helpful. With it, you will be able to secure home equity loans and lines of credit that come with interest rates that are considerably lower than that of other types of debt.

This having been said, the more equity you have in your home, the more money you will be able to borrow or have access to through a HELOC. Regardless of which equity secured debt you want to go for, it is important to be able to calculate exactly how much equity you have in your home. This will make it easier to decide what kind of loan you should get.

Easier than you may think

Calculating how much equity is in your home is relatively straightforward and can be done by anyone, provided that you have the time for it:

  • Check your bank statement

The first thing that you will have to do is to check your online bank statement. Either go to the bank or go online and get a detailed statement. You will need the mortgage-related information contained within to make the calculations.

  • Determine the value of your home

Next, you will have to determine the current value of your home, along with the actual property. There are several ways to do this and each has different advantages and disadvantages. You can look at your property tax statement and see the approximated value, or analyze how much other similar properties in your area cost. These methods are great if you do not want to spend money on professional help, but they aren’t extremely accurate.

Alternatively, you can have an appraiser come over and perform an evaluation of the building and property. This can cost you up to $500, however, the appraisal will be as accurate as the one made by the bank.

  • Do the math and find out how much equity you have

Once you have the balance on your mortgage and the value of your home, you can start doing the calculations. Simply subtract the current value of your home from the amount of money that you still owe on your mortgage. The result will be %100 of your equity.

You can then use this value to determine how much money you could get from a home equity loan or other similar types of debt, however, this will require that you go to the lender and ask how the loan is calculated. Each lender has a different formula, however, a large number of them will use a loan-to-value ratio. This is done by dividing your current loan balance by the current value of your home.

This having been said, every lender uses a slightly different formula, which means that even if you know the amount of equity in your home, you will still have to sit down with the bank or company that will give you the loan and do the math.

Be smart about when and how you evaluate your property

The formula that helps you calculate how much equity you have in your home requires the present value of the house and property. This value changes over time because it depends on what improvements you make to the house, but also on the overall price of real estate in your area. In other words, you will have to recalculate it every time you need to make a loan via a site like Adherents.com or want to check to see how much money you can get.

Apprising your home and property can cost quite a bit of money, so only do it when you are certain that you want to take out a home equity loan or access e HELOC. This will give you the exact figures that you need in order to calculate how much money you will get.

In the meanwhile, keep an eye on the price of similar properties in your area and try to approximate how much the value of the house changes when you make improvements. The result may not be extremely accurate, but it should be enough to give you an idea of when it is a good time to start considering a home equity loan.

Conclusion

Being able to determine how much equity there is in your home is always useful, and you should always keep the formula in mind. This way, if you ever need money in a short amount of time you will at least be able to estimate how much cash you can get through a home equity loan.

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A Guide on Finding the Right Type of Home Mortgage Loan for You

Are you looking for a house to buy? Realize your dream of having a home through a house mortgage loan that suits best. Some people think that there is only one type of house loan. However, if you do your homework well, you would discover that there are several types, and anyone of them might be the best fit for you.

Below are the six types of home mortgage loans and their description. Use them to help you find the best one for you.

Fixed-Rate Loan

The fixed-rate loan uses the same interest rate and monthly payment throughout the loan. As a result, the borrower knows in advance the amount that he must pay every month, including the interest. Payment due remains the same regardless of the changes in the bank rates, which the lender uses as the basis for computing the loan interest.

People who look forward to spending a big part of their life in their home will benefit from a fixed-rate loan. Because you will have the same payment to make every month, you will be able to set aside the money you need in advance.

Adjustable-Rate Mortgage

With this type of home mortgage loan, you will enjoy a low-interest rate in the first five or ten years of the loan term. However, once you have paid for five or ten years, an adjustment is made to the interest rate, which makes it higher than the previous price. One advantage of getting an adjustable-rate mortgage is that when the bank rates change, so does the interest. When bank rates go down, you will most likely pay less as well.

This type of loan is ideal for people who have a low credit rating and may have to pay high-interest rates for a fixed-rate mortgage. The adjustable-rate might result in low monthly payments, making it easy for you to own a home.

Federal Housing Administration Loan (FHA)

One advantage of buying a house through an FHA loan or government-backed loan is the low down payment. Instead of shelling out 20% of the amount to be financed, you must deposit of as low as 3.5%.

An FHA loan suits best a house buyer that does not have enough cash for the deposit. However, there are several conditions for the house buyer. First, the maximum loan is only $417,000, which means that it would only be enough for a modest house. FHA mortgage loans are not flexible. It has a fixed interest rate payable within 15 to 30 years. Borrowers must pay mortgage insurance of 1% of the total cost, which you can pay in full immediately or on a staggered basis during the life of the loan.

VA Loan

The VA loan or Veterans Affairs Loan is available to homebuyers who have served in the US military. Borrowers do not have to pay a deposit and mortgage insurance, which makes it better than taking a conventional home mortgage loan.

To qualify for this home mortgage loan, the applicant must have served in the US military for three consecutive months during a war or six straight months during peacetime. People who have been reserves for six successive years may also apply for a house mortgage loan.

Because it is a government-backed loan, the VA requires the borrower to buy a house that is his permanent home and with the minimum requirement for a property.

USDA Loan

The USDA Rural Development loan is another home mortgage loan that the government offers to residents of rural areas. You will get 100% financing, which means that you do not have to worry about the down payment. It also comes with a reduced interest rate.

Assistance intended for people living in rural areas, the loan aims to make homeownership accessible and at affordable mortgage rates. However, home buyers have to meet some requirements. First, the mortgage amount must not be more than your income by 41% at most. Second, you will need to pay for mortgage insurance.

Bridge Loan

A bridge loan is available to home buyers who still own their old home while buying a new one. The financing company will consolidate the mortgage payments for the two properties. Once you sell the old one, you can settle the mortgage and get a new loan for the new one.

This type of home mortgage loan is best for borrowers with high credit scores and whose incomes are far more than the debts. Besides, the mortgage payment for the two houses must not exceed 80% of the combined value of the two properties.

Remember that there are several types of home mortgage loans available if you know how to find them. Just do some home mortgage loan shopping to find one that is perfect for you and your needs.

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