The New Face of Home Equity in America

Across America, homeowners are waking up to a new reality: rising property prices and newfound stability in their financial portfolios. Granted, this privilege is the express domain of those with fixed investments in real estate. Given this new status quo, many more possibilities now exist. Home equity, once an arbitrary number on a mortgage statement, is now a financial lifeline for millions of Americans.

It’s a blessing to be a homeowner today, and always. Unlike renters, homeowners have a tangible stake in their investment. Home equity is defined as the difference between what’s owing on the property and its fair market value. It’s an enviable position to be in, because mortgage payments contribute an ever-increasing amount to paying down the interest and principal on the initial loan. 

This means that you’re investing in your own future, not simply paying off the bank or financial institution for a place to live. Mortgages in good standing are like anchors to individuals and their families. They create a rock-solid foundation upon which future growth and prosperity are built.

Home equity is that portion of the real estate that you actually own. It’s expressed in dollars and changes based on current market conditions. The longer you live in your home and pay down the mortgage, the more home equity you typically have, ceteris paribus. 

Here is where it gets really interesting- you can borrow against your home equity to meet your financial needs. Many homeowners tap into their home equity from time to time to cover unexpected expenses. These can include college tuition, down payments on second homes, remodeling projects, vehicle purchases, or dream vacations. 

Often, loans against your property are associated with much more favorable interest rates than personal loans through a bank or the attendant APRs on credit cards. A traditional borrower with a home loan may place a down payment on the property up front. This counts as immediate equity in the home. 

To avoid PMI, many traditional borrowers make a 20% down payment on the mortgage, thereby demonstrating their immediate stake in the home’s value. For those who cannot afford a substantial down payment, if at all, options are costlier. Fortunately, several categories of the population can access favorable mortgages. 

For some Americans, however, the first step toward home equity requires a helping hand. A VA home loan, for example, serves the interests of veterans and eligible family members. It’s an excellent alternative to traditional home loans, which may require substantial down payments, creditworthiness, and stringent ability-to-repay approvals, etc. 

An eligible service member with a COE (Certificate of Eligibility) issued by the US Department of Veterans Affairs is already in pole position with a favorable outlook, vis-à-vis a home mortgage application. Since the government partially backs VA loans, lenders are far more lenient in extending credit to veterans. Often, the interest rates on VA loans are comparable with, or better than, the prevailing interest rates from other non-VA loan mortgages.

How Equity Builds a Viable Personal Legacy

Generational wealth isn’t the domain of America’s dynasties alone. Anyone who qualifies for a mortgage and makes good on the payments can build a lasting legacy that empowers a brand-new generation. Whether it’s a VA loan for veterans or a personal mortgage loan for John or Jane, the prospects are equally bright. 

All too often, repetitive, incorrect behavior yields an unfavorable outcome, but slight tweaks that break patterns and realign focus can add tremendous value to a financial portfolio. Renting versus owning is a prime example of how opportunity is squandered. Equity builds a personal legacy in so many ways. When you have a viable stake in your property, it grows with every payment and balloons with every positive inflationary adjustment. 

We saw this during the pandemic when property prices went through the roof and homeowners suddenly had substantial equity in their properties. Granted, this ebb and flow is part of every economic cycle. However, property prices, like inflation in general, tend to go up over time. Those $30,000 homes are relics of a bygone era. And thanks to home equity, homeowners now have a real share of the economy. This reality is empowering because it opens up so many more doors to advance, improve, and succeed.

The American dream is being rebuilt from the ground up. Every mortgage payment you make strengthens your foundation. This isn’t some abstract economic concept that people can’t fathom. It’s a tangible reality. And it’s well within your reach. Seize the moment, carpe diem!