As a resident of New York who owns property, the term “home equity” has likely come up multiple times. Understanding home equity and how to use it is a crucial part of owning a home. Macco & Stern, LLP, are here to help you learn about these points of key importance.

The first thing to understand is that home equity is essentially the part of your house that you actually own. You start with the property’s market value, and then subtract your outstanding loan balance from that. The remainder left would be money that’s entirely yours, as it won’t have to go toward paying off your current house loan.

Of course, you legally own your entire house the moment you buy it. But if you’re using any loans or borrowed money in order to pay the house off, there’s still an interest in the property that your lender will hold.

This is important because your home can be held as collateral if you ever get into a situation in which you have fallen into debt.  The house itself is the collateral for the loan, and a lien on the property can be placed by the lender if they feel their financial interests are in jeopardy. Because of this, building equity is key, which can be done through loan repayments, or passively through price appreciation.

If you would like to read more about home equity, our web page on bankruptcy can teach you more about how it’s used in relation to debts or collateral. Knowing more about it will allow you to handle equity effectively in the future.