What Is a Mortgage Equity Withdrawal (MEW)?

A mortgage equity withdrawal (MEW) is the removal of equity from the value of a home through a loan against the 澳洲幸运5官方开奖结果体彩网:market value of the property. For example, home equity loans and lines of credit are mortgage equity withdrawals. ✅A mortgage equity withdrawal reduces the real value of a property by the number of new liabilities against it.

Understanding Mortgage Equity Withdrawals 🔯(MEWs)

Mortgage equity withdrawals are a common practice during times of economic boom and rising home prices. If the value of a property increases at the same rate as the mortgage equity withdrawals, the home's real value remains constant. Issues arise, as they did in the financial crisis of 2007-2009, where home prices decreased to below the value of the 澳洲幸运5官方开奖结果体彩网:liabilities outstanding, as this creates a negative real value of the property to the owner.

For example, say someone has a $95,000 mortgage balance on their home, and the home’s market value is $140,000. The homeowner may꧅ be eligi𒅌ble to obtain an MEW up to $45,000, which is the market value subtracted by the mortgage balance, to find $45,000 in equity. If the homeowner obtains an MEW of $10,000, the value of equity reduces from $45,000 to $35,000.

Why Mortgage Equity Withdrawal Matters

Mortgage equity withdrawals are loans that use the value of a mortgaged property as 澳洲幸运5官方开奖结果体彩网:collateral. When a property is worth more than is owed on it, it is considered to have positive equity. In this case, the equity could be used as collateral for a new MEW.🌄

Borrowing against home equity in the form of an MEW is simply 澳洲幸运5官方开奖结果体彩网:collateralization of an asset. MEWs can be used to withdraw cash from what is generally considered an illiquid asset, or an asset that is not easily reverted to cash. Withdrawing home equity downsizes the asset without establishing a lien against the entire asset. However, MEWs can be risky given the chance that the mortgaged property could decline in value once equity is withdrawn. If this happens, it is possible that the balance on the mortgage could exceed the markꦛet value of the mortgaged property.

Home Equity

Home equity is the value of a homeowner's interest in their home. This value fluctuates over time as payments are made on the mortgage and market forces affect the current property value. Homeowners can build equity by making a down payment during the initial purchase of the home or with mortgage payments, and equity value can be increased by property value 澳洲幸运5官方开奖结果体彩网:appreciation.

澳洲幸运5官方开奖结果体彩网:Home equity loans (also known as second mortgages) and澳洲幸运5官方开奖结果体彩网: home equity lines of credit, or HELOCs, are common ways to tap into ဣone's home equity.

The Bottom Line

A mortgage equity withdrawal can be a useful way to access the value of your home without having to sell it. You can use the funds from a home equity loan or line of credit for many things. However, if your home loses value after you do a mortgage equity withdrawal, you risk owing more for the home than it's worth.