What are the benefits of buying a house that has a lot of equity in it?

Answer 1

What exactly do you mean "has a lot of equity in it"? Specify please.

Answer 2

I'm not sure what you mean, "a house that has a lot of equity in it". The house doesn't have equity in itself. The owner might have equity in the house.

Equity is the difference between the value of the property and what is owed on it. If a house would value at $10000, and you owe $80000, you have 20% equity in the house or $20000 of equity. If you owed $50000, you'd have 50% equity...whatever the difference is.

So, I think you mean, what if I buy a house worth $100,000 but only pay $60000. Do I have $40000 worth of equity?

Lenders will generally lend you the lesser of the purchase price and the appraised value. In the scenario above, the maximum loan amount would be the purchase price, $60,000. Your rate would be based on 100% financing, because you're financing 100% of the purchase price.

Conversely, if the house has a purchase price of $60000, and the value come in at $40000, the lender will consider $40,000 to be 100% financing. This is pretty much an industry standard.

So basically, the benefit is getting a good deal on the house.

Answer 3

That's easy to figure out. If the house is worth $180,000 and you pay $140,000 then you have $40,000 in equity. You can borrow against the equity and get cash to do whatever you want with it. Or you could just leave it and when your mortgage is paid down to about $100,000 you can sell the house for a cool $80,000 profit minus the selling costs of course.

Answer 4

As a buyer, it doesn't make much difference to me if there the seller has a lot of equity in the house. I still negotiate, I still look at the price of compariable houses, its the same process.