Do you need money fast? Are you a homeowner that wants to have access to a credit line in case of an emergency? Home equity rates have dipped to all-time lows, so money is cheap than ever. Do you have equity in the home that you own now?
Equity is defined as the value in your home, and is calculated by subtracting all outstanding mortgages from the market value of the home. Because loan balances and housing prices are changing constantly, the equity that home owners fluctuates as well. Lenders are less concerned with the exact dollar amount of equity in a home than the percentage of equity. For example, a home owner with a $500,000 mortgage on a $525,000 home has $25,000 in dollar equity but less than 5% in percentage terms. On the other hand, the owner of a $60,000 condominium with a first mortgage of only $40,000 has $20,000 in equity which is 33% on a percentage basis. Lenders would prefer to lend additional funds to the condominium owner because of the higher percentage of equity.
Read the rest of the Mortgage Almanac article.