The answer is simply! Equity is the difference between what you home is worth and what you owe.
So let's just say that you own a home that is worth $300,000 and you owe $200,000 on it. Now, you have $100,00 worth of equity.
But the question is, how do you get the cash?
You've got to be a little creative and this is where it's great to be able to lean on a professional who will be able to guide you down the right path of figuring out which bank is going to offer you a way to tap into that money.
A very common way is referred to as a HELCO (home equity line of credit). A HELCO operates similar to a credit card as it is usually good for 10 years and you only pay interest based on what you borrow. This means that if you set it up and don't touch it, you won't have any interest to pay.
How can you leverage what is right in front of you?
Maybe you want to add onto your home or make renovations to it. What I would recommend is maybe even buying another house whether you plan to use it a second home or an investment property.
The bank is not paying you a lot of money but if you if take the equity you have and put it toward another home, it's going to help you achieve your financial goals!
- Doug Edrington, CEO at Berkshire Hathaway HomeServices J Douglas Properties