You’ve heard of a home equity line of credit, where your home’s value goes to work for you. That’s great—but what is home equity in Kansas City exactly, and how does it get calculated? At Cornerstone Bank, our banking team understands home equity and how to use it to your advantage.
Home Equity = the Difference Between Debt and Value
To understand what equity is in your home, start with how much you owe. Let’s say you have a mortgage with a pay off of $180,000 dollars. That’s your debt.
Your home may be worth $395,000 (more on how to get that number in a moment). That’s the value.
To calculate the amount of home equity you have, subtract the amount you owe from your home’s market value. In this case, we subtract $180,000 from $395,000.
$395,000 – $180,000 = $215,000. That’s your home equity value!
How to Get an Accurate Home Value
A starting point for finding your home’s market value is listed on your property tax valuation statement. They have the taxed value, and a market value estimate.
You could also use an online valuation tool. However, those are usually very generic, and only give a rough estimate.
The most accurate way to get a true home valuation is to have a professional appraiser come out. Talk to your banking institution about the valuation they require to move forward with a home equity loan or HELOC.
Choosing Your Home Equity Loan Amount
Once you and your bank know what your home equity equals, most banks will allow up to 85% of that equity to be used in a loan or HELOC. Your goals dictate the amount of equity to free up.
As you finalize the amount you’ll need, be sure to consider:
- Does it fit your budget moving forward (home equity loan payments)?
- Is your credit score high enough to achieve the best interest rates?
- Will you have a debt-to-income ratio appropriate for your situation?
- Is the loan for home improvements? This might qualify for tax deductions. Consult a tax advisor regarding deductibility of interest.
For Know-How Equity, Choose Cornerstone Bank.
What is home equity in Kansas City? At Cornerstone Bank, it’s a tool to finance dreams, achieve goals, and move your life forward.
Contact us about how home equity loans and HELOCS work. Our staff of banking professionals can help you navigate the options and discover the best loan for your needs. Business banking, personal banking, and more—at our location or anywhere online or mobile. We’re not the typical bank on every corner. We’re your Cornerstone Bank.