The amount of your mortgage isn’t
the equivalent of your monthly payments times the number
of months still owed on the loan. Though that will get
you an estimated figure, it won’t be an accurate
one. Each payment you make on your mortgage consists
of two parts – principal and interest. As a rule,
the interest is not a set amount each month but depends
on the time left on the loan. Your payoff will typically
be less than the total of your payments. Your best bet
to get an accurate figure is to call your lender. Keep
in mind that the exact amount of the payoff will vary
each day. The payoff amount that you’re given
will only be good for a few days, but it will give you
a good idea of what you owe until you make your next
payment.
The value of your home as used by most lenders is the
fair market value. In an appraiser’s language,
this is described as “the amount a willing seller
would pay a willing buyer on the open market.”
As a rule, an appraiser will arrive at this figure by
evaluating sales of other homes in your neighborhood,
though he might also consider what it would cost to
build the house and how much revenue it could generate
(usually used only for rental property). You can often
get an idea of the market value on your own. If you’ve
had an appraisal in the past couple of years, that figure
probably won’t have changed much unless one of
these things has occurred:
You’ve done major renovations or changes.
Property values in your area are escalating or dropping
quickly.
There are significant needed repairs that weren’t
present or evident at the time of the appraisal.
You may also go to your local courthouse and check
the value the county government assigns to your house
to get an estimate of the market value. The process
varies from state to state, so be sure to ask how they
arrived at the figure and what it represents (in some
states, the assessed value is a percentage of the market
value).
Now that you have the mortgage amount against your
property and the value of your property, you know how
much equity you have available. The next step is to
put that asset to work. Many lenders offer home equity
loans. You can use the proceeds to make home improvements,
pay off some credit cards or take a vacation.
Home equity is an asset. Don’t let this asset
go to waste. Put your home equity to work for you today.
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