Question : home equity?
im looking to buy a home. and my brother told me that the home im looking to buy has equity and at closing i can cash out the homes equity. Im confused because i thought i built the equity in the home buy pay my mortage every month. please tell me if he is right or not . it would be nice if he is. i could use the money for my business . thank you for your time
- asked by J D
All Answers:
Answer #1
If the house appraises for more than purchaseprice, yes, technically you should be able to borrow 90% of the equity - a lot of lenders havecracked down on this due to so many folks getting100% loans and then cashing out the equity andwalking away, so I would check with your lender-
- answered by Chris
Answer #2
A home is only worth what the appraisal says itis.....It may be worth say $200K, but with the badmarket it can only sell for.....$160K......thatdoes NOT mean you have $40K in equity....Equity isthe result from owing less than the houseappraises at. Remember, it can appraisehigh....but if there are no buyers...no equity. Your brother is dreaming.
- answered by Paula M
Answer #3
haha, no. Equity is the amount of value there isbeyond what you owe. If you get a killer deal itmight be worth more than you pay, but you cantcaash that out at closing- you'd have to get anequity loan (aka pay that back). Aside from that,banks prefer you to have at least 20% equity-- soa 5% buffer isn't enough to draw from withoutpaying high rates.
- answered by Amanda H
Answer #4
What your brother mean is ,that the house you arethinking to buy cost less, then appraised value.This is a equity you are buying, but in today'smortgage situation it is very hard ,ratherimpossible to get cash back on the closing,because lenders not allowing this kind oftransactions. The only way to get the money on theclosing is to agree to buy this house for higherprice and get the difference from the seller afterthe closing, because he will get the check.
- answered by bianca
Answer #5
Your correct, your brother is wrong.Hard toexplain based on your question,but, if you putsay 10% down towards the homes purchase, yourapplying 10% to the Principal or Equity. You thenhave 10% equity in the home.I don't know whereyour brother figures that you cash out the equityat closing / purchasing the home.
- answered by HeyDonny
Answer #6
having equity means that it is worth more than youpaid for it and you can sell it immediately andmake money (equity). unless you are talkingabout an auction or other unusual situation, themarket sets the price of a home. so when you buyit at a market price, there is no equity in it orit would have sold for less. be careful. pricesare still falling.
- answered by livinginma
Answer #7
Unfortunately, NO. Not at least in the sense thatI think you mean.There are ways to get cash backat closing but it's more complicated and itinvolves multiple buyers and some creativeinvestor techniques (that are legal if doneproperly)But, in the context of buying a housethat someone thinks is worth $X and you're goingto pick it up at $Y and you would get thespread(the difference) of $D, then NO. If thehome truly had built in equity then you would haveto refinance the home and find a lender that hadno seasoning requirements for a cash outtransaction.Please note, a house is only worthwhat a market will bear. The house is not worthwhat you think it is worth or even what anappraiser thinks it is worth. These are BOTHopinions. Yes, the appraiser's opinion matters 10fold over what you think because that opionion iswhat a lender is willing to accept in terms offinancing.However, If you have an appraisal for $Xand put it on the market it may not sell for that. It could sell for more or less depending onmarket conditions.What ever someone is willing topay for your home, that's the true market value atthat moment in time.SIDE NOTE: A good way to findout what it is truly worth is to run anon-obligatory auction. The price will get bid upto watch the market will bear. Then if youcomfortable with it, then accept the offer, if notpull it off the market.There would have to beextenuating circumstances for a property to besold with equity still left in it (as quantifiedby a recent appraisal).For instance, if you boughta home directly from the previous owner inforeclosure and they had half the mortgage paidoff, but they lost their jobs, ruined theircredit, and thus can't refi, so they have nochoice to sell. If you were lucky enought to getto them and say offer to split the remainingequity (buy their house for what is owed and onlypay them for half of the remaining equity, thenyou could have, a 25% equity position.) Yespeople do this. Again, anotherconversation.Anyways, depending on if thispurchase would be for an investment or for youpersonal residence then there are other things toconsider, I would find your local real estateinvestors club and ask them. Good Luck
- answered by lendingwhiz2008
Answer #8
It's great that you will have instant equity butyou CANNOT get cash back at closing. This isbecause the lender will use the LOWER of the salesprice or appraised value to determine your loan tovalue. Sorry to disappoint you, but again, youcannot get cash back at closing.CW
- answered by CINDY W
Answer #9
A home is only worth what someone will pay for it. Unless you are buying from a family member andgetting a gift of equity then the sale price orappraised value whichever is less will be thevalue used to calculate it. But either way youwill not get money back at closing.
- answered by cheeba0228
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measure and fulfill your financial needs
