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). It's essentially the amount you would receive after selling your home and paying off the mortgage.

2. How Home Equity is Calculated

The home equity formula is straightforward:

Key Components:

• Property Value: Current market value of your home (not purchase price)
• Mortgage Balance: Remaining principal on your home loan

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

3. Importance of Home Equity

Financial Benefits: Home equity is a valuable asset that can be used for home improvements, debt consolidation, education expenses, or as a financial safety net. It also represents your stake in home price appreciation.

4. Using the Calculator

Instructions: Enter your home's current market value and remaining mortgage balance in dollars. The calculator will instantly compute your home equity. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How often should I calculate my home equity?
A: It's good practice to reassess annually or when making significant mortgage payments or home improvements.

Q2: Does home equity include my down payment?
A: Yes, your initial down payment contributes to your starting equity, but equity changes over time based on payments and market value.

Q3: Can my equity be negative?
A: Yes, if you owe more on your mortgage than your home is worth (called being "underwater" or "upside-down").

Q4: How can I increase my home equity?
A: By paying down your mortgage principal, making home improvements that increase value, or through market appreciation.

Q5: What's the difference between equity and home value?
A: Home value is what your property is worth on the market, while equity is what portion of that value you own outright.