Home equity when buying or selling a house in Dallas Fort Worth – Equity may be one of the least understood aspects of home ownership, but it is also one of the most crucial. On the surface, it appears simple: equity is the difference between the current market value of your property and the amount you still owe on it. But, in reality, there’s a lot more to it, particularly when it comes to house buyers and sellers. So, if you’re buying or selling a home in Dallas Fort Worth, here are five things you should know about home equity.
1. What Home Equity Is
Our first step, then, is to determine what home equity actually is in order that you can know how to build it and use it.
“Property equity,” to put it simply, is the current worth of your home minus the amount you still owe on your mortgage, as we just explained. You have equity if you come up with a positive figure.” “Property values and how much principal you pay down on your mortgage are the key elements that influence how fast and how much it rises (or even reduces).” It’s usually a long-term endeavour, with the more time you spend in your home, the more equity you can accumulate. It isn’t something that happens over night.”
To determine how much equity you have, you must first determine the current market value of your Dallas Fort Worth home and perform the computations. You can do this by using one of the many online home equity calculators accessible. Enlisting the help of a Dallas Fort Worth agent would be even better. Simply call 972-284-9713 to learn more about this.
2. How Home Equity Works
Now, let’s examine how home equity actually works in practice . . .
The first thing to remember is that accumulating equity is similar to “investing in a long-term product, such as bonds.” For the most part, your money is locked away and cannot be used. There are some ways to tap into this equity, but generally, wealth is created over years as your share of ‘free and clear ownership of the house increases.
But sometimes, owing to dramatic changes in local market conditions, you may see steep gains or losses in your home equity. Such changes are currently in play in markets across the country right now.
“Rapidly growing home values, for example,” industry experts say, “are contributing to a huge equity growth for homeowners with mortgages across the country.” According to CoreLogic data, these homeowners have grown their equity by approximately $3 trillion since the second quarter of 2020, an increase of 29.3 percent year over year. According to the National Association of Realtors, the typical existing-home price in September 2021 was $352,800, up 13.3 percent from the previous year.”
On the flip side, plummeting home prices can destroy equity. “During the Great Recession, for instance, median sale prices plummeted by over $14,000 from the last quarter of 2008 to the first quarter of 2009.”
For a better understanding of the forces at play in your market, contact a Dallas Fort Worth agent at 972-284-9713.
3. Ways to Use Equity
When it comes to buying or selling a house in Dallas Fort Worth, there are a few ways you can use or leverage your home equity . . .
HELOC
A home equity line of credit (HELOC) is a revolving credit line that is secured by your home. How much you can borrow is determined on the amount of equity you have. You can use it like a credit card when you need it, but you must repay the amount borrowed.”
With a HELOC, you’ll usually get a lower interest rate than you would with a credit card. This is a fantastic choice for sellers who need to perform renovations, alterations, or upgrades before listing because “you only use what you need when you need it.”
Home Equity Loan
Unlike a HELOC, you borrow a lump sum against your equity rather than a revolving line of credit with a home equity loan. “You will get all of the funds at once and will be required to make monthly principle and interest payments. You repay the loan over a predetermined time period, with interest set at a defined rate.”
Cash-out Refinance
A cash-out refinance is another strategy to use home equity when buying or selling a home in Dallas Fort Worth. It allows you to refinance your mortgage for a higher amount than you owe and spend the money however you like.
“For example, if your home is worth $300,000, but your mortgage is only $200,000, you might do a cash-out refinance for a new loan of $275,000. You receive $75,000 in cash and start making new (and larger) mortgage payments.”
4. Important Considerations
There are however a few things to consider in determining the best way to use your home equity . . .
A HELOC, which works similarly to a credit card, gives you greater flexibility in terms of accessing and using the funds than a home equity loan (up to a certain limit and within a certain time frame). “However, they come with higher closing costs and variable loan rates, which could result in you spending more in the long run.”
Also, a cash-out refinance – which “allows you to take on a larger mortgage in exchange for accessing the equity in your home” – can be a bit deceptive. It’s not a second mortgage, but rather a form of refinancing. So although you’re monthly payment won’t increase, the length of the loan extended, so you’ll be paying on it much longer.
Ultimately, though, “if you’re planning to use your money as a lump sum as you would with a down payment, a cash-out refinance or home equity loan will probably make more sense.”
5. Contact the Home Equity Experts
When you consider all that’s involved, home equity may be quite complicated, and there’s a lot for buyers and sellers to comprehend. That’s why, if they wish to use their equity, buyers and sellers should deal with an experienced Dallas Fort Worth agent. So, if you’re going to buy or sell a home in Dallas Fort Worth and want to take advantage of your home equity, give us a call at 972-284-9713.