Many titles have reported on how a homeowner (the difference between the current market value of your home and the amount you owe on your mortgage) has increased dramatically over the past few years. CoreLogic indicated that equity has grown for the average homeowner at $ 17,000 only in the last year. ATTOM Data Solutions, in their newest US Domestic Stock Report, revealed 30.2% of the 59 million mortgaged homes in the United States it has at least 50% of equality. That doesn’t even include the 38% of households which are owned for free and clearly, which means they have no mortgage at all.
How can equality help a household?
Having equality in your home can drastically impact your life. Equity is like a savings account that you can enter when you need money. Like all other savings, however, you need to be careful about how you use it. Here are three good reasons to consider using your equity.
1. You experience financial difficulty (loss of work, medical expenses, etc.)
Equality gives you options during difficult financial times. With a tie, you could refinance your house to get money that might ease the burden. It also puts you in a better position to talk to the bank about restructuring your home loan until you can get back on your feet.
Today there are 2.7 million Americans who are currently on a patient program due to the pandemic. Ninety percent of those in the program have at least 10% equity. This puts them in a better position to get a loan modification instead of facing foreclosure, as many banks will see equity as a form of collateral in a new deal. If you are in this position, even if you cannot get a modification, the equity allows you the option to sell your house and leave with your equity instead of losing the house and your investment in it.
2. You need money to start a new company
We’ve all heard the stories of how many big American companies started in the founder’s garage (i.e. Disney, Hewlett Packard, Apple, Yankee Candle, Keeping Current Matters). What we may not notice, however, is that the garage (along with the rest of the home) provided the initial money for many of these companies in the form of refinancing.
If you are passionate about an idea you have about a new product or service, the equality in your home may enable you to realize that dream.
3. You want to invest in the future of a loved one
There has been a long-standing tradition in this country for many homes to help pay for college expenses for their children. Some have taken advantage of the equality in their homes to do so.
Additionally, George Ratiu, Supreme Economist by realtor.com, notes:
“52% of Americans who bought their first home in 2020 said they received help with their down payment from friends or family. The number one lender? Their parents.”
It is safe to assume that a percentage of that down payment money probably came from domestic equity.
Saving in any form is a good thing. The forced savings you can earn through a mortgage payment allow you to create wealth through home equity. That equality can be handy in good and harder times.
Content previously posted on Preserving Current Affairs