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Assume you purchased a house for 0,000, made a 20 percent down payment, and got a loan to cover the remaining 0,000.In this example, your home equity interest is 20 percent of the property’s value: The property is worth 0,000 and you contributed ,000—or 20 percent of the purchase price.However, these loans are complicated and can create problems for homeowners and heirs.Home equity loans are tempting because you have access to a large pool of money—often at fairly low interest rates.You'll be unable to log in to in the future if your browser has not been updated.Put another way, home equity is the portion of your property that you truly “own.” You're certainly considered to own your home, but if you borrowed money to buy it, your lender also has an interest in it until you pay off the loan.A home equity loan is a lump-sum loan, which means you get all of the money at once and repay with a flat monthly installment that you can count on over the life of the loan, generally five to 15 years.
Borrow against the equity: You can also get cash and use it for just about anything with a home equity loan (also known as a second mortgage).
Technically, you own everything, but the house is being used as collateral for your loan.
Your lender secures its interest by getting a lien on the property. If it’s worth 0,000 and you still only owe 0,000, you have a 60 percent equity stake.
The easiest way to understand equity is to start with a home’s value and subtract the amount owed on any mortgages or other liens.
Those mortgages might be purchase loans used to buy the house or second mortgages that were taken out later.