Home Equity: What It Is and How to Use It
Home equity is the difference between what you owe on your mortgage and what your home is currently worth. Your equity can increase in two ways: over time as you make payments on your mortgage, or if the value of your home increases. Home equity can also decrease if the value of your home declines from its initial purchase price.
You can build home equity in a number of ways:
- By making a big down payment
- Focusing on paying off your mortgage
- Paying more than the minimum
- Staying in your home at least five years
- Renovating and investing in landscaping services
By building your home equity, you are essentially building financial value in your home that you can use in the future for retirement, to purchase another home, or to cover specific expenses.
How to Use Your Home Equity
There are multiple ways to use your home equity. You could use it to purchase a new home. If you’ve built up a significant amount of home equity, you can utilize that as a down payment and potentially move into a larger home with the same monthly mortgage or even less than what you were paying for your old home.
You can also use it for retirement purposes. If you are age 62 or older, you can enter into a reverse mortgage, in which you stop making payments on your home and instead receive a regular monthly check based on the value of the equity in your home and current interest rates.
If you have certain expenses, you may initiate a loan against your home equity to pay for them. Common expenses that loans are used for include debt consolidation, college expenses, or making home repairs.
These loans are given at a much lower interest rate than typical commercial credit loans since your home is used as collateral. However, if you fail to make payments, you may lose your home to foreclosure.
Benefits of Working with a Premier Homeowner’s Insurance Agency in Florida
As you build equity in your home, it is important to have a reliable homeowner’s insurance policy. A Florida home insurance agency can ensure that you select a policy that covers potential hazards that could affect the value of your property.
Hazards can include storm damage, flood damage, and personal liability exposures. The proper policy will ensure that you are able to recover expenses that will enable you to repair your property, mitigating the risk of a decrease in the value of your home or the potential loss of equity.
Importance of Insuring Your Home in Florida
Clearly, you want to protect your home (and the equity that you have built into it over time) as much as you can. One of the best ways to do that is through working with an insurance company in Florida.
A Florida insurance agency can recommend the most appropriate homeowner’s insurance policy to make sure that your home is secured from any potential hazards so that you can sleep well at night.