Posted in Finance, Accounting and Economics Terms, Total Reads: 53
Definition: Mortgage Equity Withdrawal (MEW)
Mortgage Equity Withdrawal is an economic term which means, amount of equity withdrawn against the market or current value of your House. In simple terms, Mortgage Equity Withdrawal or MEW can be defined as the amount of money borrowed by a person against the value of his/her house.
Let us consider an example, if a person has a $100,000 mortgage balance on his/her house. And the market value of the house is $150,000. He/she is eligible to get an MEW up to $50,000 ($150,000 market value - $100,000 mortgage balance = $50,000 in equity).
Now, if he obtains an MEW of $20,000, the value of his equity will go down from $50,000 to $30,000. Thus, we can say the equity can be used as a collateral for Mortgage Equity Withdrawal.
Advantages of MEW
• It helps in calculating Marginal propensity to consume, which determines the consumer spending.
• Also helps in predicting Gross Domestic Product (GDP) of a country.
• Helps in determining rise in prices of house and interest rates, as both are linked to each other.