He is being financially challenged with upkeep of a home that is currently up for sale I was thinking before his father paid off the home that possibly there could be some money in equity his father he states never really understood things like equity and maybe never got it out perhaps still sitting.
2nd part I donot totally understand about equity please if you could explain how that works.
2007-12-19 08:52:35 · 10 answers · asked by RETNIW 2 in Business & Finance ➔ Renting & Real Estate
"Equity" just means that money that you currently have invested in the house. When you first buy a house, you only put down a small amount of money, the rest of house is paid for by a loan. So you have a small amount of "equity" in the home. You really only OWN a small part of the house - the rest is owned by the bank, so to speak. If your house is worth $100,000 and you've paid off $75,000 of your loan, and still owe $25,000, then you've got $75,000 of equity in your home.
A "home equity loan" is when you borrow money, against the value of your home. In the example above, you could take out a loan for the $75,000 that you have in your house, and then you'd have (roughly) a $100,000 mortgage, no equity in your home, and $75,000 in your hand.
In this market, I would be very very careful before I would take out a loan against the value of the house. If he was in a very bad way, financially, he could take out a home equity loan against a portion of the value of the home, and then pay it off when the home sold. But do not take out a loan for anywhere near the full value of the home. He'll regret it if the home doesn't sell.
2007-12-19 09:02:45 · answer #1 · answered by Anonymous · 1⤊ 0⤋
If the house is free and clear of any liens, there is all sort of equity in this house.
Equity is the value of the house minus any mortgage that is owed on the house. Since there is no mortgage, what ever the house is worth minus any taxes that are owed is equity.
Why is this house being sold and who authorized the sale?
Once the father paid off the house and the son has control, did the son go through a probate and get a deed to the house in his name?
If probate has not been done the house can not legally be sold, because the father's name should still be on the deed as the property owner.
If the son is presently residing in the house and is currently employed and the property properly transferred to him he can get a loan on the property.
There might be some legal problems here that might best be solved by a probate attorney if the property has not been through probate as of yet.
I hope this has been of some use to you, good luck.
"FIGHT ON"
2007-12-19 09:07:59 · answer #2 · answered by loanmasterone 7 · 0⤊ 0⤋
Equity is the value of the asset minus any liabilities. A mortgage or another type lien would be a liability. Since the property has no mortgage and a buyer came along and paid $150,000.00 cash the 150K would be the equity. That is the simplified version. If your friend had placed a small lien against the property, say for $10,000.00 to help pay for upkeep and maintenance until the property sold, then the equity would be $140,000.00
2007-12-19 09:48:02 · answer #3 · answered by Anonymous · 0⤊ 0⤋
Equity is the difference between what the home is worth and how much is owed on it. If there is no mortgage, all the home's value is considered to be "equity".
Your friend could mortgage his father's home, but remember it isn't "free money". It still has to be paid back. It may be better to rent the house that's for sale until the market gets better, especially if the market rent would equal the payment he now faces.
2007-12-19 09:41:39 · answer #4 · answered by Cheryl G 7 · 0⤊ 0⤋
If its paid for then there is equity - 80% of the value can typically be loaned against depending on the lender some institutions will give 90 & even up to 100% but I would sit on it because the market is a terrible place right about now.
2007-12-19 09:03:09 · answer #5 · answered by Monie N Da Middle/where she at? 4 · 0⤊ 0⤋
If the house was paid off in the 1970s, then there is no mortgage. That means that the equity in the house is equal to whatever the house could be sold for today.
By the way, when you friend inherited the house, he inherited the "stepped up" value of the house. That means he won't have to pay an income tax on any appreciation his father realized during his lifetime. In other words, if the house was worth $150,000 when the father died and the friend sells it for $150,000, there is no income tax due.
2007-12-19 09:03:00 · answer #6 · answered by Kathryn 6 · 1⤊ 0⤋
If your friend now has a home that his father paid off in the 70's there are 2 things:
- Your friend now owns a home with no mortgage payments
- The value of the home has most likely gone way up since the 70's, so your friend may have a valuable home on his hands.
For instance, his father may have paid $50,000 for the home and the home may now be worth (as an example) $100,000 now.
2007-12-19 09:03:36 · answer #7 · answered by myacumen.com 3 · 0⤊ 0⤋
Real estate equity is the difference between the amount you owe on a mortgage and the value of the property.
Example: Value of home - $100,000
Balance due on mortgage - 50,000
Equity $50,000
If the home is free and clear ( has no mortgage debt) all value is equity.
I hope your friend gets some good financial advice before selling and blowing all that nice cash.
2007-12-19 09:01:37 · answer #8 · answered by Anonymous · 2⤊ 0⤋
Value of house NOW - mortgage owed NOW = Equity.
If the house is worth $100,000 and he doesn't have a mortgage, his equity is $100,000.
Equity is not a bank account somewhere with money in it.
2007-12-19 08:57:58 · answer #9 · answered by Anonymous · 3⤊ 0⤋
If the house is paid off...then he has 100% equity.
In other words, if the house is worth $100K...then he has $100K in equity.
2007-12-19 09:02:17 · answer #10 · answered by Expert8675309 7 · 0⤊ 1⤋