Home equity loans are becoming increasingly popular. These loans allow the mortgage holder to tap into the equity in their home in order to take out a large loan for some specific purpose, such as paying for college fees or buying a holiday home. One of the key factors to consider first of all, is the amount of equity in the home and the best way to do this is via a home equity calculator. To learn more about how to use such a calculator, read this article.
What is a home equity calculator?
First of all, it is necessary to understand equity. Equity is the amount of assets that a person has. Home equity means the percentage of the home which is an asset. For example, if the market value is less than the loan value, then the house is not an asset, at least not yet. As soon as the principle in the loan drops below market value, then there will be some degree of equity in the house. For example, a house with a market value of £100,000 and a loan of £70,000 will have equity of £30,000. Prior to considering an equity loan, it is essential to understand that the maximum equity loan available is only 90% and in some cases, it can be as low as 70%. The mortgage holder Consequently, if a mortgage holder calculates that their equity is less than 10%, then they have no hope of getting an equity loan and should not even attempt to do so. Again by way of illustration, a £100,000 house with a mortgage outstanding of £95,000 will represent only 5% equity and will not be capable of receiving an equity release.
How to use a home equity calculator
In order to accurately evaluate the equity in a home, it is necessary to follow these steps: 1. Evaluate the value of a home. This is easily carried out by inviting an appraisal company to evaluate the home for a fee. Of course, the clever home owner could invite several estate agents to give a value of the home suggesting to the estate agents that they are interested in selling. Simply, divide the values given by them in order to find the average value. 2. Ask the financial institution who is holding the mortgage to provide details as to the principal which is remaining on the mortgage. 3. Look online for equity home loan calculators. Enter the details through at least two calculators in order to assess the average equity available. 4. Consider the data and enquire about equity loan rates. 5. Consider, whether or not, it is a good idea to take out a home equity loan.