A home is a significant investment, as it generates wealth as an appreciating asset. Moreover, it also provides the homeowner with equity. Equity is simply the difference between the market value of a property, and the outstanding debt.

Homeowners, some of whom have only owned their homes for as little as 3 to 5 years, may have fast accumulated incremental value known as equity in their homes. It stands to reason, therefore, that the level of home equity that is currently being enjoyed by homeowners whose mortgage loans have been repaid by as much as 50% or more, represents significant wealth in terms of their equity in the existing property. Bear in mind, however, that this equity only translates into cash if the homeowner decides to sell the house or access an Equity Loan.

In evaluating your financial position, you may consider how you can make your home equity work for you.

Understanding Home Equity

Facilities are provided to increase the debt on the property based on current market value, as opposed to the original cost that may have been the basis of funding upon initial purchase or construction. Referred to as a home equity loan, access to this facility is dependent on your current needs and existing financial circumstances. A home equity loan is generally secured by way of a second mortgage on the property. However, depending on the interest rate and/or outstanding repayment term of the existing mortgage, the homeowner may opt to refinance the existing balance and increase the amount of the total outstanding debt.