|What is home equity?
Equity is the difference between the value of the home and the existing mortgage or mortgages that you have. As an example, if your home is valued at $250,000.00 and you currently have a mortgage of $150,000.00 the difference is $100,000.00 which is your equity.
The available home equity is what you can borrow against to pay off your existing bills. By doing this you are reducing the monthly payments to a more manageable level.
Let’s use an example.
Let’s say that you have the following short term debts.
Obviously, if you were in a similar situation you may require debt relief. With the equity in your home you may be able to consolidate these debts into one payment at a significantly reduced monthly payment. This can be done either by way of a new first mortgage or a second mortgage.
In the above example we could take out a new second mortgage of say $50,000.00 (there are legal fees and broker/lender fees involved so we have borrowed extra to cover these costs). Say the payments were $500.00 per month on the second mortgage. This would give a monthly payment relief of $775.00 per month.
A new first mortgage may also be a possibility if you qualify.
Click here for a printer friendly version of our work sheet to outline your own personal situation.