Don’t you hate when someone is talking to you, and you have no clue what they are talking about? It takes me back to being a child, and I would just nod and smile until that part of the conversation was over. Sometimes it’s not even a big word! Working as a loan officer, I find we have a lot of seemingly small words that can be just as confusing as the huge ones. I thought I could walk through the basics of a term I use all the time - EQUITY - so that the next time you hear it you will not only know what it means, but you’ll understand how to obtain it, and what you can do with it!
What is it?
Equity is simply the difference between what your possession is worth and what you owe someone else (typically a bank) for it. You can have equity in many different possessions including your home, vehicle, and other valuable assets! If you look at it from the perspective of owning a home, it would be the amount of money you would get if you sold the home and paid off all your loans.
Take the example of your home being worth $200,000 and you owing the bank $125,000. If you sold the house for $200,000, you would give the bank back their $125,000, and you would get the remaining $75,000. That’s the equity you had built up in your home: $75,000.
How do I get it?
Having equity is a good thing. Equity is obtained by owing someone else less money than what your property is worth. This can be done in many different ways including:
- Paying cash for your house or vehicle and not having a loan against it. You instantly have 100% of the equity for your new possession!
- Making a cash down payment when buying your home or vehicle. When buying a house, the downpayment can be a lot of money, but it is all going towards growing your equity in your house. While you might not have as easy of access to it as when it was in your bank accounts, that cash is an investment that you can access if needed through a refinance or sale of your house.
Making your monthly payments and lowering your balance owed to the bank over the life of your loan. With CSB, biweekly and weekly payments help you build your equity even quicker as it applies additional funds towards your loan balance!
Refinancing for a lower rate or term. Both how long you have your loan for and your interest rate on it will impact how quickly you can build your equity.
Refinancing for a lower rate or term. Both how long you have your loan for and your interest rate on it will impact how quickly you can build your equity.
Now I have it, so what exactly can I do with it?
Equity can be used for many things, and what you choose to do with it is entirely up to you! Do you need a new roof or flooring in your home? Maybe you’d like to install that swimming pool you’ve been dreaming about since you moved in! Sometimes it can be those unforeseen expenses when you’re extra thankful for this financing option. Whatever it is, being able to use the equity in your house for these scenarios will save you money over going a different route.
Don’t hesitate to reach out to one of our local CSB lenders today! There are many financing options for pulling equity out of your property including a cash out refinance, home equity loan, and home equity lines of credit (HELOC), and we can help you identify what’s right for you! It’s time to put your equity to work for you!
Written by Lindsay Shook
Vice President & Market Development Officer at Community State Bank
lindsays@csbemail.com
260.925.3567
February, 2024
Vice President & Market Development Officer at Community State Bank
lindsays@csbemail.com
260.925.3567
February, 2024