1. What is Home Equity?

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

2. How Home Equity is Calculated

The home equity formula is simple:

Where:

• Property Value — Current market value of your home
• Mortgage Balance — Remaining amount owed on your mortgage

Example: If your home is worth $300,000 and you owe $200,000 on your mortgage, your home equity is $100,000.

3. Importance of Home Equity

Details: Home equity is important because it represents your financial stake in your home. It can be used for home improvements, debt consolidation, or other financial needs through home equity loans or lines of credit.

4. Using the Calculator

Tips: Enter your home's current market value and your remaining mortgage balance. Both values should be in dollars. The calculator will instantly show your home equity.

5. Frequently Asked Questions (FAQ)

Q1: Can home equity be negative?
A: Yes, if you owe more on your mortgage than your home is worth, you have negative equity (sometimes called being "underwater" on your mortgage).

Q2: How often should I calculate my home equity?
A: It's good to check annually or whenever your home's value changes significantly (after renovations or during major market shifts).

Q3: Does home equity include my down payment?
A: Indirectly yes - your initial down payment contributed to your starting equity, but current equity is based on current value and current mortgage balance.

Q4: How can I increase my home equity?
A: By paying down your mortgage principal and/or when your home's value increases through market appreciation or home improvements.

Q5: Is home equity the same as cash?
A: No, home equity represents value that could potentially be accessed (through sale or borrowing) but isn't immediately spendable like cash.