Home Properties Understanding What is Home Equity is all About

Understanding What is Home Equity is all About


The value of the property is greater as compared to the actual price when it was bought. Your property such as your home is a valuable asset that increases and this means that you can achieve substantial growth of your home equity.


How to build a home equity?

Building a home equity is the easier way to pay off your mortgage or home loan. Likewise, it is also a powerful tool to manage your finances.

However, when paying the house loan, most of the payments goes to the interest of the loan and not to the principal amount that you owed. Obviously, if the loan amount is higher, you’ll also end up paying higher interest as well.

Taking a home equity loan can help home owners to pay the mortgage prior to the loan tenure. This can be a second mortgage in which you can use your house as collateral. The amount of the home equity loan depends on the current value of the home.

On the other hand, home equity loan can also be used for paying college expenses or other unsecured debts. Likewise, it also offers tax advantages by transferring unsecured debts to a home equity loan.

Read also: Tips before Buying Real Estate Properties in the Philippines

The home equity increases if the homeowner if the market value of the property increases and the homeowner pays the outstanding principal amount of the mortgage. The homeowner can borrow the maximum amount of 80% of the home equity.

Likewise, having a home equity credit line makes it easier to get approval. But, this requires you to repay the interest rate and minimum amount every month that include application fee and property appraisal.

If ever the home owner decided to put the home on sale, the home equity line must be paid completely.

How to avoid repayment problems?

Before signing the fine lines, it makes sense considering some tips to avoid repayment problems.

  • Consult an attorney before signing a Deed
  • Take time before making a decision to apply for home equity loan
  • Read and understand the terms and conditions prior of signing the agreement. Seek help from a lawyer if there’s something that you don’t understand in the contract

The monthly amortization of the home equity loan can be paid either through postdated checks or opening an account.