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When you're looking into your financial options at home in your Toronto condo, you will likely come across the concept of equity rather frequently. In order to have a solid grasp on what the possibilities are for your real estate, you should learn what this term means and how you can use it. This article will explore the concept of equity and how it pertains to your home so that you can use it to your financial advantage in the future.
Equity, when used in finance circles, means the amount of money you assets are worth once you take into account any debts that are drawn against them, which is known as liability. You can also think of it as net worth. If you have stocks or a share in a business, your equity is the amount of money you would get, cash in hand, if you liquidated it all to fund your home renovations in Hamilton, Ontario. It is possible to have negative equity if you are "in the red," which means that your operating costs or debts exceed what your assets are worth.
When you see the word "equity" in the context of owning London, Ontario real estate, it means the amount of money you could get for your property less what you would have to spend to settle the remainder of your mortgage debt. You can think of equity in simple terms as the amount of money you have paid off on your mortgage, but in fact equity is more complex than that. Because equity is based on the market value of the home, so the equity on your property may increase or decrease according to whether the home values in your area are doing well or not, even if you haven't paid off any more of your loan.
The reason you so often see the word equity used in real estate circles is that banks often encourage clients to borrow against their equity. Mortgages for self employed people, for instance, may allow clients to borrow back some of the money they have already paid off against their mortgage if they fall on hard times. This is what is known as using the equity in your home. You can only use equity if you have some to borrow against, so it will generally take several years for you to build any up.
You should be careful when borrowing against the equity in your home. Though it may seem like free money, you're actually just lengthening the amount of time it will take to pay off your Georgetown, Ontario real estate and increasing the amount you have paid in interest over the course of the loan. However, borrowing against equity is generally a better deal than a line of credit or credit card if you need money for emergency renovations or such like.