Home equity\u00a0represents the\u00a0market value\u00a0of a homeowner’s\u00a0unencumbered\u00a0interest in their\u00a0real property\u2014to be precise; it is the difference between the home’s\u00a0fair market value\u00a0and the outstanding balance of all\u00a0liens\u00a0on the property.<\/p>\n
The property’s\u00a0equity\u00a0will rise as the debtor make payments against the\u00a0mortgage\u00a0balance, or\/and when the value of the property appreciates. In economics,\u00a0home equity<\/em>\u00a0is also refereed as real property value.<\/p>\n In theory, home equity carries a zero\u00a0rate of return\u00a0and it is not regarded as a liquid asset.\u00a0Home equity management<\/em>\u00a0is a process where equity is raised\u00a0via\u00a0loans\u2014at favorable, and often tax-favored,\u00a0interest rates\u2014to invest otherwise\u00a0illiquid equity in a target that offers higher returns.<\/p>\n Home owners obtain equity in their home from two sources. They get the equity with their\u00a0down payment, and the principal portion of any payments they make against their mortgage. They also stand to gain in equity when the value of the property appreciates. Investors usually consider buying properties that will leap in value in due course of time, thus making the equity in the property to rise, and also provides a return on their investment when the property is sold.<\/p>\n Home equity can also serve up as collateral\u00a0against a home equity loan\u00a0or\u00a0home equity line of credit (HELOC). Many home equity plans pre-fix a timeframe during which the borrower can borrow money, for example, 10 years. After the end of this \u201cdraw period,\u201d the borrower is allowed to renew the credit line. Should the plan restrict the renewals, then the borrower will not be able to borrow additional money once the period has got over.\u00a0 Whereas some plans may require payment in full of any outstanding balance at the end of the period, others may let the repayment done over a fixed period, for instance, 10 years period.<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" Home equity\u00a0represents the\u00a0market value\u00a0of a homeowner’s\u00a0unencumbered\u00a0interest in their\u00a0real property\u2014to be precise; it is the difference between the home’s\u00a0fair market value\u00a0and […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[102,106],"tags":[],"class_list":["post-1172","post","type-post","status-publish","format-standard","hentry","category-finance","category-personal-finance"],"_links":{"self":[{"href":"https:\/\/www2.stockmarketwatch.com\/learn\/wp-json\/wp\/v2\/posts\/1172","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www2.stockmarketwatch.com\/learn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www2.stockmarketwatch.com\/learn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www2.stockmarketwatch.com\/learn\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www2.stockmarketwatch.com\/learn\/wp-json\/wp\/v2\/comments?post=1172"}],"version-history":[{"count":0,"href":"https:\/\/www2.stockmarketwatch.com\/learn\/wp-json\/wp\/v2\/posts\/1172\/revisions"}],"wp:attachment":[{"href":"https:\/\/www2.stockmarketwatch.com\/learn\/wp-json\/wp\/v2\/media?parent=1172"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www2.stockmarketwatch.com\/learn\/wp-json\/wp\/v2\/categories?post=1172"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www2.stockmarketwatch.com\/learn\/wp-json\/wp\/v2\/tags?post=1172"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}