If you are currently a homeowner, or are in the market as a homebuyer, you might wish you better understood home equity and how to use it to your advantage. As your Houston real estate team, we are here to help explain it to you! We think you deserve to understand how your largest financial asset works, and how it can benefit you.

The National Reverse Mortgage Lenders Association recently published an incredibly detailed report on home equity and all of the ways that homeowners can tap it! As this report is very long, here’s a nice summary we’ve put together for you.

What is home equity?

To be sure we’re all on the same page, let’s start with the basics. Home equity is the difference between the current market value of your house and the money that you owe on it.

While Americans as a whole have untapped equity equaling over 11 trillion dollars, it’s important to note that home equity isn’t liquid, meaning usable, unless you know how to extract it.

How can equity be extracted?

  • Selling and buying a less expensive home: This is a great option for retirees or homeowners who have lived in their house for a long time and have gained good equity!
  • Selling and renting: If you’re not sure what you want to do with your future, and you want all of your home’s equity at your disposal, you could sell and begin renting.
  • Financial products: Banks and lending institutions offer loans that allow you to use your home as collateral. A Home Equity Loan gives you some or all of your home’s equity, and you pay it back with interest. A Home Equity Line of Credit, or HELOC, allows you to borrow an agreed on limit whenever you wish, and then pay it back. Cash-Out Refinancing allows you to pay off an existing mortgage with a new one. When you refinance, you may take out equity that you’ve earned.

What if you’re 62 or older?

Homeowners age 62 or older have additional options for tapping home equity! Reverse mortgage loans can help supplement retirement savings. You can take them as a lump sum, a line of credit, fixed monthly payments or both monthly payments and a line of credit. There are many benefits to a HECM LOC, a line of credit for those age 62 and over, compared to a HELOC.

For more information, check out the full report or this handy infographic from RISMedia.

Homeownership in Houston is a great way to invest in your future! There is so much you can do with home equity, and many ways to extract it. Ready to buy or sell your home? No matter what your needs are in the Houston real estate market, our team is here to help.