You often hear that owning a home can help build financial stability, but what does that mean and how does it happen?
The main way to build “wealth” through homeownership is equity. Let’s break down what exactly equity is and how it benefits you.
Home equity is the difference between the current market value of your home and the amount you would owe to pay off your loan. To estimate your equity, subtract your mortgage balance from the appraised market value of your home. For a more precise calculation, contact your servicer to determine the final payoff amount needed to pay off your balance.You can build home equity by:
Your home equity is part of your total wealth as a homeowner. When you decide to sell your home, the equity that you have built over time will come back to you in the sale. For example, if you paid off your $200,000 mortgage and sold your home for $250,000, you would receive what is left of the $250,000 after closing, which you could use for a down payment toward a new house.
To learn more about home equity and appreciation, visit My Home by Freddie Mac®.