Home equity is the difference between the value of your home and the unpaid balance of your current mortgage.
For example, if your home is worth $250,000 and you owe $150,000 dollars on your mortgage, you’d have $100,000 in home equity.
Your home equity goes up in two ways:
- as you pay down your mortgage
- if the value of your home increases
You may be able to borrow money that will be secured by your home equity.
Interest rates on loans secured with home equity can be much lower than other types of loans. You must be approved before you can borrow from your home equity.
Be aware that you could lose your home if you’re unable to repay a home equity loan.
Not all financial institutions offer home equity financing options. Ask your financial institution which financing options they offer. You may be given the choice to compare between refinancing your home, borrowing pre-paid amounts, getting a home equity line of credit or taking out a second mortgage.