When you own a home, you possess a major financial investment. Your home’s equity – the market value minus the remaining balance on your mortgage – can increase your net worth and give you borrowing power.
Watch the video to learn more about Understanding Equity, then test your knowledge at the end of the lesson.
The term “home equity” can best be described as:
A. The base market value of your home divided by your household’s annual income
B. The mortgage interest rate multiplied by the current market value of your home
C. The current market value of your home minus the remaining balance on your mortgage
D. The sale price of your home minus the principal balance of your mortgage
Most lenders will allow you to borrow all of your home’s available equity, as long as your credit score is good or excellent.
A. True
B. False
An effective way to use your home equity is to:
A. Cover home renovations
B. Kickstart a retirement fund
C. Invest it for a faster rate of return
D. All of the above