Home
Back
Equity Formula:
| From: | To: |
Home equity represents the portion of your home that you truly own. It's calculated as the difference between your home's current market value and the outstanding balance on your mortgage. Equity grows as you pay down your mortgage and as your property value increases.
The calculator uses the simple equity formula:
Where:
Explanation: This straightforward calculation shows how much of your home you actually own versus how much you still owe to the lender.
Details: Knowing your home equity is crucial for financial planning, refinancing decisions, home equity loans, selling considerations, and understanding your overall net worth. It's a key indicator of your financial health as a homeowner.
Tips: Enter your home's current market value and remaining mortgage balance in currency units. Use accurate, up-to-date figures for the most precise equity calculation. Both values must be positive numbers.
Q1: What is considered good home equity?
A: Generally, having at least 20% equity is considered good as it eliminates private mortgage insurance and provides better loan options.
Q2: How can I increase my home equity?
A: You can increase equity by making mortgage payments, making extra principal payments, or through property value appreciation from market conditions or home improvements.
Q3: Can my home equity be negative?
A: Yes, if your remaining mortgage balance exceeds your home's current value, you have negative equity (often called being "underwater" on your mortgage).
Q4: How often should I calculate my home equity?
A: It's good practice to review your home equity annually or when considering major financial decisions like refinancing or taking out a home equity loan.
Q5: What can I use home equity for?
A: Home equity can be used for home improvements, debt consolidation, education expenses, or as collateral for home equity loans or lines of credit.