What Do Banks Use To Determine House Value And Home Equity?

Secrets you should know about how banks determine house value and the the equity in you home. Including tips for how you can estimate these values.

So, how do you know the value of your home and the amount of equity you have in it? First you should note that property values are constantly changing and influenced by both the national economy and local markets. Knowing what aspects are aseessed when valuing a home can make you better prepared to sell, buy or negotiate with a bank.

Factors banks use to determine house value.

Banks use specific factors to determine the value of your property. Local real estate markets will have a large impact on what a house is worth in relation to its physical attributes and location. Appraisers are professionals that work specifically at valueing real property. Things they look for when valuing a house include size of structure (square feet), quality of construction, the floor plan, current state of the house (well kept or not), location to important or valued landmarks and size of the landscape the house is located upon. There is a distinct difference between the estimated value that most banks will use, and the actual value that people would currently be willing to pay for the property.

How the amount of home equity you have is decided.

The bank will determine your home equity by subtracting the amount of outstanding debt (remaining mortgage obligation) you owe for the house or property from the market value. Often, this amount is used as collateral for taking out loans or a line of credit. This type of equity can be used to consolidate other types of debt, such as credit cards or car loans. Often home equity loans must be repaid within a specific period of time.

The subjective nature of assessing the value of a property only gives the bank a general idea of property value. The estimation is necessary to establish the amount of equity a person has in their home. Actual property value and equity are important pieces of information to know for a property owner to successfully manage their assets.

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