Home Equity: You May Actually Have More Than What You Think

Bobby Fenner, Lic. in VA
Bobby Fenner, Lic. in VA
Published on October 24, 2015


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Almost 91% of all mortgaged properties managed to land the positive equity position a lot of homeowners are aiming for. The negative equity epidemic is improving and changing for the better. This was made possible because of the constant rise in home prices for a little more than 3 years– it serves as an indication that the money flows have increased, while the housing inventory has decreased.

Most homeowners would agree that this is good news. However, are they even aware that because of this, their equity position changed as well?

Based on a recent study conducted, Fannie Mae suggests that a lot of homeowners aren’t even aware that their equity position isn’t the same anymore– most of which even underwent a dramatic change. With that, most of them fail to take advantage of the situation.

For example, the study showed that 23% of Americans still have the misconception that their homes still have a negative position. The truth is, only 9% of these homes are in that standing.

This only implies that more than 32% of Americans with a mortgage fail to realize the opportunity they can enjoy from this kind of situation. Due to the sizable equity position, the majority of homeowners will have the privilege of moving into a new housing situation with ease– something that will definitely meet their current needs.

This issue was tackled on their most recent report.

Wherein, homeowners who have the habit of underestimating their homes’ value doesn’t only underestimate the home equity, but also has the tendency of underestimating the following:

1) The notable down payment that could be settled with the use of home equity;
2) The possibilities of qualifying for the needed mortgages;
3) The opportunities for selling the current homes to buy a new one.

Home For Sale Real Estate Sign in Front of New House.

Here’s How to Evaluate the Equity of a Home

The home equity is the difference between the current mortgage balances and the appraised value of the home. Meaning, the more equity a homeowner has, the more net dollars are available to the home owner if they sell.


Current Loan Balance/Current Appraised Value

Example: You have a loan balance of $150,00. Your home currently appraises for $210,000. So, the loan-to-value would appear like this:

150,000/210,000= 0.71

Convert 0.71 to a percentage, and this will give you a loan-to-value ratio of 71%

Knowing how to calculate the loan-to-value loan, as well as having the idea on how this can impact your current situation can help you come up with choices on how to reach your financial goals with ease– whether you should choose to sell your home, borrow from an equity, refinance, or simply continue paying down the mortgage.

The Appraisal

A professional appraisal is an important part of determining the loan-to-value ratio. In case that an on-site appraisal is needed, then the lender must look for a certified appraiser, and this will be the one to calculate the true value.

Homeowner Tip

One of the best ways to improve the appraisal is to make smart improvements in your home. Therefore, consulting an appraiser is highly recommended. Likewise, keep in mind that the market conditions can also negatively affect one’s home value no matter how much improvement is made.

Final Words

For homeowners, it’s important to familiarize yourself about the true equity of your home, and keep updated on the possible opportunities that go along with this. In such a case that you’re uncertain about the savings needed for the home, contacting a real estate professional can help you figure out the digits. Who knows, you may be surprised after finding out the true value

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Home Equity: You May Actually Have More Than What You Think
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