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Home Equity Formula:
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Home equity represents the portion of your home that you truly own. It's the difference between your home's current market value and the outstanding balance on your mortgage. As you pay down your mortgage or as your home's value increases, your equity grows.
The calculator uses the home equity formula:
Where:
Explanation: This simple calculation shows how much of your home you actually own versus how much you still owe to the mortgage 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 metric for Canadian homeowners to track their financial progress.
Tips: Enter your home's current market value and your remaining mortgage balance in Canadian dollars. Both values must be positive numbers. Use current, accurate figures for the most precise equity calculation.
Q1: What is considered good home equity in Canada?
A: Generally, having 20% or more equity is considered good as it eliminates mortgage insurance requirements and provides better borrowing options.
Q2: How can I increase my home equity?
A: You can increase equity by making mortgage payments, making home improvements that increase value, or through natural market appreciation.
Q3: What is negative equity?
A: Negative equity occurs when your mortgage balance exceeds your home's value, often called being "underwater" on your mortgage.
Q4: Can I borrow against my home equity in Canada?
A: Yes, through home equity loans, lines of credit (HELOCs), or refinancing, typically up to 80% of your home's value minus your mortgage balance.
Q5: How often should I calculate my home equity?
A: It's good practice to recalculate annually or when considering major financial decisions, or when local real estate markets experience significant changes.