Home equity—the difference between a home’s value and its remaining mortgage—takes time to accrue but is a major source of wealth for many Americans. According to the latest Survey of Consumer Finances, primary residences account for 26% of the average household’s assets. While no asset is completely safe, in some states home equity faces a unique threat—confiscation by local governments. This spring, the U.S. Supreme Court will decide if this practice is constitutional.
Home equity is a useful asset. It can be borrowed against in the form of a home equity loan or turned into cash when the home is sold. If the seller subsequently buys a cheaper home, the money remaining from the previous sale can be used elsewhere, such as living expenses in retirement, buying a car, taking a vacation, or sending a kid to college.
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