1. What is Home Equity?

Home equity is the portion of your property that you truly own. It represents the difference between your home's current market value and the outstanding balance of all liens (like mortgages) on the property.

2. How Does the Calculator Work?

The calculator uses the simple home equity formula:

Where:

• Appraised Value — Current market value of your home
• Outstanding Mortgage — Remaining balance on your mortgage(s)

Explanation: This calculation shows how much of your home's value you actually own versus what you still owe to lenders.

3. Importance of Home Equity Calculation

Details: Knowing your home equity is crucial for financial planning, qualifying for home equity loans or lines of credit, and understanding your net worth.

4. Using the Calculator

Tips: Enter the current appraised value of your home and the outstanding mortgage balance. Both values should be in the same currency (typically dollars).

5. Frequently Asked Questions (FAQ)

Q1: How often should I calculate my home equity?
A: It's good practice to recalculate whenever your home's value changes significantly or at least annually.

Q2: What's considered good home equity?
A: Generally, having at least 20% equity is good as it helps avoid private mortgage insurance (PMI) and gives you borrowing power.

Q3: How can I increase my home equity?
A: By paying down your mortgage principal and/or through home value appreciation (market increases or home improvements).

Q4: Can I have negative equity?
A: Yes, if you owe more on your mortgage than your home is worth (called being "underwater" on your mortgage).

Q5: How is this different from home equity loans?
A: This calculates your current equity. Home equity loans allow you to borrow against that equity.