Home equity is determined by your home’s appraised value minus the amount of debt that is owed to the bank or other financial institution. If you purchased a home that was appraised at $150,000 but was able to purchase it at a reduced price from the buyer of $140,000 and placed $20,000 down you would have an immediately available $30,000 in equity in the home.
When looking at property as an investment, the amount of immediate equity is an important factor. Investors should look at the home’s appraised value and also what they plan to invest in remodeling or rehabbing the home to gain more equity.
Borrowing Against Equity
Your equity in your home can be borrowed against for anything you wish. If you have $30,000 equity then you should have no trouble being able to get a loan for 80% of that amount. There are some banks that will allow a 100% equity loan, but not many.
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