What is a home equity loan?
|
|
Home equity is the amount your home is worth minus the amount you owe on your mortgage. For example, if your home is worth $100,000 and the principal balance on your mortgage is $50,000, then your home equity – the part of your home that you own free and clear – is $50,000.
A home equity loan is a loan that uses the equity in your home as collateral. That means you are using your home as a guarantee that you will repay they loan. Before you even consider borrowing against your home equity, you need to understand that a home equity loan reduces your home equity by the amount of the loan and that if you do not repay the loan, you could lose your house.
How to Calculate Home Equity
|
 |
Your home has a fair market value of:
The principal balance remaining on your mortgage is:
Your home equity is:
Now, assume you take a home equity loan of $25,000
Your home equity now becomes:
Return to Smart Money Solutions
|
$100,000
-42,000
$ 58,000
-25,000
$33,000
|
|
 |
|
BorrowSmart Public Education Foundation provides the knowledge, skills and tools home equity borrowers need to gain financial literacy and "borrow smart."
Established in 2001, BorrowSmart and its partners empower consumer equity borrowers through lenders, credit counselors, regulators and direct contact by providing free information and education that leads to open access to available credit for all homeowners.
|
|
|
BorrowSmart Public Education Foundation will grow to a national presence and be recognized throughout the housing and financial communities for its educational programs and services to reduce the national foreclosure rate among home equity borrowers. BorrowSmart programs will create smarter home equity borrowers and more home ownership retention across America.
|
| |
|
|
|
