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
Land that has poor income potential, usually used in an agricultural sense meaning that the land is untellable, has poor access, is extremely steep, has suffered serious erosion, is ...
Payment made by the tenant to the landlord for the right to use property, such as an apartment or office. ...
Representation on a flat surface of any region that depicts the elevation of that region. ...
Exposure can have various meanings in real estate and insurance, depending on the context. Let’s have a thorough look at these scenarios! Exposure as property’s ...
Process of simultaneously appraising several pieces of property. Normally, occurs when a local government conducts a reassessment. ...
The right of possession and use of property without undue disturbance by others or adverse claims of others to title or interest. ...
Member of a partnership whose liability for partnership debts is limited to the amount invested in the partnership. A limited partner is prohibited from taking active part in the management ...
Map presented to a municipality's planning agency by a real estate developer for consideration and approval. ...
Upgrading made by a lessee to leased property. Examples are paneling and wallpapering. These improvements revert to the lessor at the expiration of the lease term. As improvement costs are ...
Have a question or comment?
We're here to help.