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Home or Investment Property Equity: Be Sure the Bank Gives
You All that You Deserve
Home equity is your own personal money machine. If you want
financial freedom, a home equity loan is probably the best way to
achieve it. You can pay down credit cards, pay off cars, both at
high interest rates, or you can actually use your home equity to
invest and build the money into a fortune. The biggest problem
people run into with home equity is that they don't have enough
of it. Sometimes, the problem may be with your bank and not with
your equity.
In order to know how much equity you have in your home, you
must first know what you owe on your mortgage and then how much
your home is worth. Here's the secret to getting the most equity
out of your home or investment property. Let's say you own
$100,000 on your home or investment property, and you believe it
is valued at $150,000. If a bank will loan 90 percent of the
value, they'll give you $135,000 minus what you owe, or a $35,000
equity loan.
But wait just a minute. Let's suppose the bank tells you that
they believe your home is valued at $130,000. Now, they'll give
you a home equity loan of just $17,000 (117k minus the 100k that
you owe). That's a whopping 18k less than what you thought you
were getting.
The answer? Educate your lender. This happened to me recently.
The lender had my home valued at $15,000 less than I said it was.
So, instead of giving up on my home equity loan, I simply
educated the lender. I explained that I $25,000 in simple
appreciation, based on the 4 percent that homes in my
neighborhood receive. Then, I said I had $12,000 worth of
improvements in the past two years. Finally, I asked for a
complete appraisal, instead of the recent sales in the
neighborhood that the bank was using. Now, this increased my
closing costs a bit, but it was well worth it. In fact, a couple
of days later, the lender called to inform me that the full
appraisal came in $7,000 higher than the number I gave them. Now
my equity loan was even bigger than I had originally hoped - 90
percent of 7k gave me an additional $6,300!
You see, our instinct is to always trust that the lenders and
mortgage brokers know more than we do. In many cases, this is not
true.
Mark Barnes is an investment real estate and real estate
finance expert. Get his free mortgage finance course at
http://www.winningthemortgagegame.com.
Mark is also the author of the new novel, The League, a shocking,
sports-related conspiracy. Learn more about his suspense thriller
at http://www.sportsnovels.com.
MORE RESOURCES updated Thu. June / 08 / 2023
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