Free Home Values Useful for Planning Home Equity Financing

For homeowners who want to access home equity for paying off credit cards, remodeling their homes, or meeting unexpected expenses, determining current home value is essential. Home equity financing is contingent upon three important factors: home worth, home equity, and current local real estate trends. Let's explore how these factors can influence decisions about home equity financing.

Home Worth

It's necessary to determine current home value when looking for any kind of home loan. Free home value calculator tools are widely available online. Of course, they provide general estimates based on home size, age, and location. Subtracting any mortgage balances from the home value estimate provides an estimated amount of home equity. When approving home equity financing, mortgage lenders typically require professional appraisals or a detailed estimate of home worth from one or more real estate professionals. These valuations can vary considerably from free home value estimates, as professional valuations include on-site inspections and review of local home sale trends.

Cashing Out Home Equity: Yes or No?

Home values are decreasing in many areas; this means that home equity reserves are also declining.  A cushion of home equity can provide protection against owing more on your mortgage than your home is worth -- which could put you in a bind if you ever have to sell quickly. Local real estate professionals can provide current market value estimates and information about local market trends that may impact home worth. This knowledge is essential for planning how much home equity to use.

Real Estate Trends and Short and Long Term Decisions

No one can pinpoint how property values will change, although it is possible to spot trends when considering multiple home sales in a specific area over time.  For those with enough home equity, using home equity financing to liquidate credit card debt can provide much-needed financial relief. On the other hand, converting short-term consumer debt to long term mortgage debt can incur additional finance charges. Homeowners must weigh the pros and cons of home equity financing as applicable to their situation. Anyone deeply in debt may benefit from using some home equity to better manage debt.  It's also a good idea to consider reasons for taking cash from home equity. Vacations may soon be forgotten and new cars depreciate quickly. Home remodeling can add lasting home value. And those credit card debts? Home equity financing may help, but only when homeowners can commit to saving for emergencies and limiting credit spending to amounts they can repay monthly. Mortgage lenders offer a variety of home equity financing options and can work with homeowners to find an appropriate home loan option.

About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds BA and MA degrees in English from the University of Nevada, Reno.