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When it comes to refinancing your mortgage, there are many factors that you must consider and variables that you have to account for. What is equity, is a concept that you must fully understand before you move forward with refinancing your mortgage. Nothing has more of an impact than the equity that exists in your home.
What Is Equity?
In basic terms, the equity is simply the difference that exists between the appraisal value of your home and the remaining balance of your current home mortgage. This means that if you have done improvements on your home or paid down a substantial part of your mortgage, you might have a large amount of home equity at your disposal. The more equity that you have will result in more refinancing options.
Interest Rate Benefits
Refinancing your mortgage will enable you to access the equity in your home, but you will also most likely lower your interest rate. You have most likely only increased your credit rating since your initial mortgage and have paid off other lines of debt, which will result in you getting access to better interest rates. A lower interest rate after your mortgage is refinanced can save you substantial amounts of money each year. This means that simply getting access to the equity in your home is not the only benefit that can be gained from refinancing your mortgage.
How Is Equity Evaluated?
Since equity involves knowing the actual value of your home, there is a process that must be completed. This process of learning the amount of equity in your home is often referred to as an appraisal. A home appraisal is the most essential part of determining the amount of equity. This appraisal is completed by a professional to determine the entire value of your home.
How Do You Protect The Value of Your Home?
When you are looking to refinance your home, you want to protect the value that you already have an add more. You have the ability to make minor repairs and improvements in your home to increase the value and get access to more home equity. You can consult with an appraiser to find out the most meaningful improvements that can be made to make the most impact. Equity is the basis of the credit line that you are getting access to and you can increase this by adding value to your home.