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Home Equity Working for You

Home EquityHouse on Pile of Cash


For most of us, our homes are the largest asset we own and the best performing investment.


Home Equity is defined as; the difference between what your home is worth and what is owed. There are two dynamics at work; appreciation and the unpaid balance. They work in concert to make Homeowner’s equity grow.

To see what your homes rate of appreciation is, take the increase in value of your home over a one-year period, then divide that by the starting value.  This will give you the rate of appreciation for that year.


The news frequently reports statistics on appreciation for the month, a year or longer.  Those reports are national averages. To understand better how your property has appreciated; the local appreciation is more representative.

The National Association of REALTORS® reports “The median existing-home price in June was $363,300, up 23% from June 2020. Every region in the country recorded price jumps. This marks 112 straight months of year-over-year gains.”


Low inventory has caused significant price appreciation, which has increased homeowner equity. According to Black Knight, a mortgage technology and research firm, at the end of 2020, roughly 46 million homeowners held a total of $7.3 trillion in home equity.

If you have a mortgage on your home – while your home is appreciating, the unpaid balance is declining.  With each payment you make, an increasing portion is applied to the principal,  decreasing the unpaid balance. Increasing your home equity.


Every month the equity in your home grows because it’s worth more due to appreciation,  while the unpaid balance is shrinking because of amortization.

As a Homeowner with equity, you can borrow against that equity; and use the cash for a variety of options like paying off high interest credit cards, make home improvements, or fund college for the kids. Most lenders require the homeowner maintain at least 20% equity. This means you can potentially borrow up to 80% of the appraised value less the amount that is currently owed on the property.


The options include a cash-out refinance mortgage or a home equity line of credit, HELOC. While some institutions have stopped offering HELOCs, they’re still available in some areas.

The HELOC is a line of credit established for usually ten years. That line of credit is available to draw out as needed. Interest is calculated daily. Like a credit card, when the balance is paid down, the unused portion of the available credit is available again.


A word of caution; at some point the market will turn – no one can know when or how dramatic it could be.  When it does turn, price appreciation will stall and may even dip.  It’s the nature of all markets, they rise and they fall.   Make sure you’re not getting over-extended using the equity in your home when the market does turn.

Your real estate agent may be able to offer some good lender suggestions for you.

We work closely with Homeowners, from the day of purchase to the day of sale and all the times between. We want to help make our clients homeownership experience the best it can be.   If you’re on the fence whether you should take advantage of this Sellers Market – give us a ring, we’re happy to help. (760) 218 – 5752

Cathi and Ben Walter

Filed under: Homeowner Tips, real estate blog · Tagged with HomeEquity