Mark Hunke

Denver Real Estate Specialist

The Mark Hunke Team
Your Denver Real Estate Experts
Call Us Today
303-619-7793
  • Home
  • Luxury Communities
    • Castle Pines Village
    • Chenango in Centennial, Colorado
    • Cherry Creek
    • Cherry Hills Village Real Estate
    • Denver’s Country Clubs
    • Denver Executive Homes
    • Denver Highlands
    • Greenwood Village
    • Highlands Ranch Real Estate
    • Observatory Park
    • Park Hill Colorado
    • Polo Grounds Colorado
    • The Preserve Colorado
    • The Pinery, Parker, the Club at Pradera
    • Red Rocks Country Club, Willow Springs, Willow Brook
    • South Aurora, Colorado Real Estate
    • Washington Park
  • Luxury Home Search
    • Luxury Home Search Form
    • Featured Properties
    • Map Search – Denver Luxury Homes
    • Find My Dream Home
    • Denver Relocation Guide
    • Get Luxury Property Alerts
  • Buyers
    • Buying a Home
    • Step 1 – Choose a Realtor
    • Step 2 – Get a Loan!
    • Step 3 – Research the Neighborhood
    • Step 4 – Submitting the Offer
    • Step 5 – Closing The Deal & Moving In
  • Sellers
    • Sell Your Home
    • Selecting a Professional Denver Luxury REALTOR®
    • Are You Ready to Sell a Luxury Property in the Denver Area?
    • Determining the Listing Price
    • Real Estate – Selling Your Home FAQ
    • What’s the Best Listing Price For Your House?
  • Finance
  • About
    • About Mark Hunke
    • Denver Real Estate Blog
    • Letters of Recommendation
    • Realtors – Join The K Company
  • Contact

Buying a Luxury Home: Understanding Home Equity

September 18, 2015 By Mark Hunke

Buying a home is about finding a place for you to call your own. Whether you live alone or with a family, it is imperative for you to find a place that suits your needs. However, you also need to think about the future and the return on your investment. Understanding home equity is an important part of that.

Mortgage vs. Value

Home equity is the difference between the amount you owe on your home and any other property it secures and the actual market value of your home. When you first buy a home, there will be little – if any – equity. The seller’s real estate agent likely determined the market value of the home when you purchased it, and used that figure to come up with the price you paid. Over time, though, as you pay down the balance of your mortgage, the equity grows. In some cases, equity can diminish. These are things you should consider when you buy your Denver luxury home.

When Does Equity Grow?

Concisely, the bigger the gap between the amount you owe on your home and your home’s fair market value, the more equity you have. You can do many things to increase your home’s market value, which has a direct effect on your equity. Home improvements are the number one way to improve equity, but there are other factors to consider. For example, if your neighborhood’s school system improves over time, or if crime rates drop, your property may become more valuable with time.

When Does Equity Diminish?

In some cases, home equity may actually diminish with time. This typically occurs when the value of a home begins to fall, whether due to disrepair or even the state of the neighborhood in general. For instance, if a well-maintained luxury home has an expected value of $1.5 million but other homes in the neighborhood sit vacant and in disrepair, this diminishes the overall value of your home. Things such as crime rates, school systems, and even neighborhood amenities like shopping and restaurants can have an impact on the equity in your home, as well.

Why is Equity Important?

As you build equity in your home, you also build a line of credit that you can draw on when needed. For instance, if the fair market value of your home is $1 million and you owe $250,000 on the balance of your mortgage, you have roughly $750,000 in equity to work with. You can draw on this a little at a time or all at once, and because your home essentially secures those funds and acts as collateral, you get lower interest rates. You can use the equity in your home to pay for college, to fund a vacation, or even to buy another piece of property.

Many people tend to get confused about home equity and the things that effect it, but your real estate agent can provide valuable information about equity potential in many Denver luxury homes. Many things affect your home’s equity, and learning more about them can help you make better buying decisions.

Filed Under: Uncategorized

Recent Posts

  • New Home Sales Slow Despite Lower Prices
  • Higher Credit Scores are Coming: Are You One of the Lucky Ones?
  • The Housing Market Slump Still Exists in Some Locations
  • Fewer New Builds – Why the Sudden Slowdown?
  • Do Walk-In Closets Improve Home Values?

Categories

  • Centennial Colorado
  • Cherry Hills
  • Denver Area
  • Denver Real Estate
  • Energy Efficient Properties
  • Financing
  • Greenwood Village
  • Highlands Ranch
  • Home Buyers
  • Home Rentals
  • Home Sellers
  • Investment Properties
  • Job Market
  • Luxury Homes
  • Parker Colorado
  • Real Estate
  • Uncategorized

Search for Homes

  • Facebook
  • LinkedIn
  • RSS
  • Twitter
5-star logo
Equal Housing
Blue Fire Group    Real Estate Websites
© 2023 Copyright
LAC
Buying Buddy    Powered By Buying Buddy ®