Consolidating mortgage and home equity loan
This is because most of the money you pay in the first few years of your loan goes toward interest instead of principal.As you pay down your balance, a higher proportion of your monthly payment goes toward principal instead of interest.As you make payments on your mortgage, you reduce your principal – the balance of your loan – and you build equity.If you still owe money on your mortgage, you only own the percentage of your home that you’ve paid off.This process, called amortization, means that you build equity faster toward the end of your loan term.If you want to build equity faster in the first few years of your mortgage, you can pay more than your minimum monthly payment.Estimating your home value can give you a rough idea of how much equity you have, but an appraisal is the only way to know for sure.You can access the equity you’ve built for several different purposes, including lowering your payment, making home improvements, paying tuition and consolidating debts.
If you have a conventional loan, PMI is automatically canceled once you reach 22% equity in your home according to your regular payment schedule.In this case, you would have ,000 of equity in your home as soon as you close.With each mortgage payment you make, the balance of your loan decreases, and you build more and more equity (assuming your home value doesn’t decline).Just tell your lender that the extra money should be applied to your principal.
Equity is based on the appraised value of your home.
Why not tap into it to pay off debt, make home improvements and more?