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Now, let's say that you have paid $12,000 toward
principal and your property. Remember that you property was valued at $95,000 when you bought it. Now, since you have made payment on your principal, your $95,000-home is now worth $115,000. Your beginning equity ($19,000), plus principal you have paid ($12,000) and increase in your property value ($20,000) gives you $51,000 in equity.
Home Equity Loans: Equity as a Valuable Asset
Banks and borrowers both benefit from home equity loans. The reason for this is that equity is a valuable asset to have. You can put it to use without having to sell your home. And because most people's domicile is their biggest asset, lenders regard home equity loans as secure. For that reason, interest rates for home equity loans are lower than for other loans.
Who are best borrowers of Home Equity Loans?
Earlier in article, we have made mention that home equity loans are beneficial to both lender and borrower. However, like all things, home equity loans also have their downsides. The disadvantage to home equity loans is that if you default on loan, lender could foreclose on your home. For this reason, home equity loans are statistically most suited to stable, middle-aged borrowers.
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