Mortgage : Home Loans : Refinance : Home Equity Loans

By Ben Afzal

Instant Equity Basics

Many people sign up to purchase brand new homes.

Usually at the time of signing the purchase agreement the home is not yet constructed or finished.

Sometimes this process can take months or even over half a year. During this time the appraisal value of the property will continue to rise.

The purchase price on the contract will remain the same, regardless of how the market value changes.

If you signed up to purchase a $300,000 property with 100% financing that is the price you will have to pay when the property is ready and you can buy it.

On the day the newly constructed property is finally available you may find that the market value of the property has risen to $350,000.

When you are purchasing a property the mortgage lender will typically use the lower of the purchase price or market value.

You will only be able to get a loan for $300,000 on this property.

Exploiting Your Instant Equity

Even though the appraisal may show the property is worth $350,000 now the contract price is $300,000. The $300,000 price is what the loan is made on.

After you have the property you will have $50,000 in equity. This is your

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This entry was posted on Thursday, October 19th, 2006 at 4:20 am and is filed under Refinance. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.