You have EQUITY, now what!

What is equity in terms real estate? 

The Investopedia definition is: 
The difference between the current fair market value of the property and the amount the owner still owes on the mortgage. It is the amount that the owner would receive after selling a property and paying off the mortgage. Also referred to as “real property value.”

Equity can either increase or decrease in any given year. 

Can you access this money before you sell? YES - You simply complete a "cash-out refinance". This means that you'll reset the clock on your mortgage (sometimes lowering the payment) loan and increase the balance. Some people like to pay down their mortgage as fast as possible and others like to put their EQUITY to work.

Putting your equity to WORK simply means that you'd reinvest this money into another property. You might want a bigger or smaller home or you might want to purchase an investment property to rent out.  

An example:

Purchase price: $550,000
Interest rate: 5% (investment rate)
Down payment: 25% (best route for fees and cash flow)
TOTAL payment including taxes and insurance: $2,887.31

You will just about break even while having your tenant pay off a home that will increase in value conservatively at 4% a year. Aside from that you'll have a new tax benefit. Let me know if you'd like to check numbers to see if this makes sense to YOU.  




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