Equity is just a property's value after all debts have been paid off. If your home is worth $300,000 and you have a $150,000 mortgage on it, you have $150,000 in equity. Whether you know it or not, this equity can help you get through tough times or give you a way to get money. Let's look at some examples.
"Medical Emergencies"
People around the world think you are lucky if you never have a financial emergency in your life. Most people on Earth, though, don't have this kind of luck. We can't tell if there will be any emergencies in the future. If you don't build your wealth now, when you have control and can plan, you could end up in a lot of debt and face a serious financial crisis if something unexpected comes up and you need a lot of money to fix it.
An example of a common emergency is a serious illness or accident that needs a lot of medical care and costs a lot of money. If this ever happens to you, you will be very grateful that you bought a home. If you have equity in your home, it's easy to get a home equity loan or a home equity credit line to get the cash you need.
"Loss of Income":
If you lose your income all of a sudden, you might fall into debt. If you lose your job and can't make your monthly payment, your credit card debt and other high-interest debt will start to grow. If you've ever used home equity to build up your wealth, it will now help you get through a tough financial situation. With your home equity, it would be easy to get a home equity loan to pay off your debts. The interest rate on a home equity loan is much lower, and you can choose how long you want to pay it back over. By getting a home equity loan to pay off all of your debts at once. Your monthly payment will be a lot less than what you pay on your other debts with high interest rates. So, it helps you save money and buys you some time while you look for a new source of income.
Education
College isn't cheap anymore, and paying for your kids' education can be very expensive and stressful for parents. College tuition worries can be put to rest by using the value of your home. You can borrow the money against the value of your home to pay for your kids' college.
Summary
Over time, a home's value grows. As your equity grows, you build up a pool of money that you can use in hard times. Building equity is a great way to build wealth, and it can help you out financially when things get tough.
