The word “equity” comes up in many conversations around loans, but often the subjects of these conversations vary greatly. Therefore, it can become confusing as to what home equity is and how it relates to your KC home loan.

A Brief Definition of Equity

If you are a homeowner, more than likely a bank or qualified lender provided the money for most—or at least part—of the home’s value. Therefore, your home equity is the amount of your home’s value that you officially own. For example, if you make a 15% down payment on a house, you have a home equity interest of 15%. As you make your monthly payments towards your KC home loan, your equity increases little by little. However, your home equity is not determined by your mortgage payments alone; your equity will fluctuate with the housing market as your home’s value increases or decreases.

How to Build Home Equity

You can accumulate equity for any type of home loan, including government-backed and conventional KC home loans. There are many ways to build your equity more quickly than standard monthly payments, including:

  • Making larger mortgage payments
  • Making biweekly mortgage payments
  • Improving the value of your home with home improvements & maintenance

How Equity Helps Your Financial Status

Equity has a cash value. Therefore, equity contributes to your total net worth, making it an asset often used for:

While these actions may be beneficial or unavoidable, they essentially lower your home equity. In some cases, you may have to start from scratch and second mortgages can have as many disadvantages as advantages. Talk to an experienced loan officer before you use home equity for a secondary loan.

Learn More About How Your Home Equity Can Help You

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The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.