Home Equity Basics

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As much as everyone dreads making those monthly mortgage payments, one way to think of them is paying into your future in the way of equity. Simply stated, your equity is the cash you can access as you accrue it. If you are looking to renovate a property or maybe even pay off some high interest credit card debt, equity can be an amazing way to get some cash into your pocket. Here are some more details about home equity, what it is and how to use it.

When talking about real estate, your equity refers to the ownership of a home. So even though you legally can own the home, you only have all of its equity once the mortgage is completely paid off. You can of course access the equity you have potentially before your loan has been paid off. See how to access it further down in this article.

How to calculate it

There are two forms of equity. The initial equity which is the amount of money you put down on the property. So if you close on your new home with 20% down, then you have 20% equity. The other kind is progressive equity. This is the amount of equity you gain in a few ways. As time goes on and real estate market conditions improve and grow, then your home should be worth more. If you do some appropriate home improvements, then the home will increase in value as well. Finally, as you continue to pay down your mortgage, you can also increase your equity as you reduce the size of your loan. So at any time you can calculate equity by taking the current market value of your home and subtracting the amount owed on the mortgage.

Ideas on ways to use it

Once you have a large amount of equity you can choose to do some things with it. You can potentially take out equity to consolidate debt that you may have on higher interest credit cards or other loans. Some people take equity out and choose to flip houses where they buy a property that needs fixing and then sell it to yield a profit. Others may decide to just buy additional properties like rental buildings and collect monthly rents for hopes of some passive income.

How to access it

So all is great if you have some equity, but how do you access it to use it? There are a few ways. The first option is you could do a home equity line of credit (HELOC). This is basically a loan in the amount of some of the equity in your home. This will really just function like a second mortgage. You get the money up front and can start paying it back monthly over a fixed period of time. Another way is a cash-out refinance. This is when you refinance your home with an entirely new mortgage and new loan rate and you can pull out some of your equity out at that time. This only makes sense if you can get a better mortgage rate than you already have or if you are looking to take out equity while also possibly doing a shorter term for your new home loan.

Beth Dickerson

Boston, MA

Primary phone
(617) 510-8565
Email
[email protected]
Address
277 Dartmouth St. , 2nd Floor,
Boston, MA 02116

About The Author

One of Boston’s most reputable real estate brokers, Beth Dickerson has achieved more than $2 billion in sales and thousands of successful real estate transactions over her nearly thirty-year tenure. Beth has received national acclaim from the real estate industry and represents some of the most prestigious residents and properties across Massachusetts. Her enduring record as a top producer comes from the intuitive gift of sensing her clients’ needs. She has built a business that is referral-based at its core—a testament to her relationship-driven approach and penchant for exceeding expectations. It is this nuanced expertise that Beth leverages to guide many of her clients-turned-friends through some of the greatest milestones of their lives.

Beth was the proprietor of her own real estate company before joining the residential division of R. M. Bradley in 1993, where she was a top producer for more than a decade. In 2003, she founded her own boutique real estate firm, Dickerson Real Estate, before merging with Gibson Sotheby’s International Realty in 2007. Today, Beth attributes her success to her comprehensive marketing and advertising strategies, exclusive contact network, and unparalleled insight into neighborhoods like Back Bay, Beacon Hill, the South End and Waterfront. With an understanding that no two clients are alike, she works with clients in all phases of life—from first-time buyers to luxury developers, seasoned sellers and beyond. Beth offers clients the resources to aggressively market their property locally, nationally and globally, and her attention to detail, drive and enthusiasm are unmatched.

Beth has appeared in prestigious media outlets including The Wall Street Journal, Mansion Global, The Boston Globe, and Boston magazine, and was prominently featured as Greater Boston’s real estate expert on WCVB Chronicle in 2020. She has had the honor of serving as President of the Downtown Council of the Greater Boston Real Estate Board. For over ten years, she has been a Co-Chair and Committee Member for the Massachusetts General Pediatric Hospital for Children’s Storybook Ball. She serves as a Board Member of the Community Music Center of Boston and a member for the Perkins School for the Blind, Emerald Necklace Park Conservancy, Justine Liff Luncheon, Youth Villages and the Boys & Girls Club of Boston, among dozens of other organizations throughout the Boston area.

A long-time resident of Boston’s Back Bay, Beth was an active member of the community as she raised her two children: she served as treasurer of the Clarendon Street Playground and was an avid supporter of the Hill House Community Center.