Equity Appreciation
Definition of "Equity Appreciation "
The American Dream has cemented the role of homeownership into the collective conscience of the US population. Homeownership provides a place for families to stay that is their own, as well as the means to build equity. Before we get into analyzing what equity appreciation is, let’s first understand what equity is.
Equity or home equity is the difference between your home’s worth and the value you own on your mortgage. For example, a house bought for $300,000 with a $30,000 down payment, leaving $270,000 in the loan amount. To determine your home equity, you have to subtract the outstanding balance from the price paid for the home. When you buy the home, your equity is $30,000, and this grows with each mortgage payment. When you pay off your whole mortgage, your equity is 100%.
What is Equity Appreciation?
Equity appreciation results from home equity that increases due to appreciation. This is one of the two ways through which anyone can build their equity. The first method is mentioned above, by paying off your mortgage, but the second one deals with the market value of your home.
It is highly unlikely that your home value will remain the same after you purchase it. This value can go up and down, but the national average when it comes to property appreciation is 3%. Because of this, once you purchase a home, if it’s well maintained and prices in the neighborhood are appreciating, your home equity will also appreciate. Meaning that while your home equity grows from $30,000 with every monthly mortgage payment, it can also grow because of home appreciation. So, based on the example above, a $300,000 home that appreciates by 3% annually will have an increased home value of $403,000 (rounded up) in ten years.
Through equity appreciation, you can reach financial stability. However, there is no way to ensure your home equity will appreciate, but a market analysis can help as some areas appreciate faster than others. Economic conditions can also lead to property depreciation, but if you don’t maintain your home, this can also be a result.
Popular Real Estate Terms
The income earned on an investment, typically stated as a percentage of the market price ...
The term actual notice is used most often in connection with property law, but the concept can also be applied in other law areas. To define actual notice, we can look at the two major ...
Legal proceeding whereby a person's property is attached and used to pay an obligation. The employer may withhold part of the employee's salary to the court until the debt has been paid. ...
Representative house, apartment, or cooperative used as a sales tool to show how the actual unit bought will probably appear in design and construction. An example is a model apartment. ...
The right to possess, exclusively occupy, enjoy, control, and dispose of real estate. Ownership rights to realty are granted by the ownership of a title to real property. ...
A clause inserted in a mortgage agreement requiring a future buyer of the subject property to obtain the consent of the lending institution prior to assuming the mortgage. In this ...
The amount of a periodic payment, whether monthly, quarterly, or annually, including interest and principal, required for a mortgage payment. ...
Individual or entity who pays for the professional services of another person or business. ...
The Loan-to-value ratio (LTV) is a calculation that measures how much you need to pay for a mortgage (loan) concerning how much the asset is worth. The loan-to-value ratio in real ...
Have a question or comment?
We're here to help.