Home equity

The difference between what your property is worth and how much you currently owe on your mortgage.

What is the biggest secret in real estate? Your mortgage is a loan against your income, not a loan against the value of your house. Without an income, in many cases you cannot get a loan. If you suddenly experienced difficult financial times, would your rather have $25,000 of cash to help you make your mortgage payment, or have an additional $25,000 of equity trapped in your home? Almost every person who has ever lost their home to foreclosure would have been better off if they had their equity separated from their home in a liquid, safe, conservative side fund that could be used to make mortgage payments during their time of need.

Home equity is not the same as cash in the bank; only cash in the bank is the same as cash in the bank. Being house rich and cash poor is a dangerous position to be in. It is better to have access to the equity or value of your home and not need it, than to need it and not be able to get at it. Keeping home equity safe is really a matter of positioning yourself to act instead of react to market conditions over which you have no control.

Submitted by "Equity Man" Mike Brouse