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Home Equity Formula:
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Home equity represents the portion of your property 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 and your property value increases, your equity grows.
The calculator uses the simple home equity formula:
Where:
Explanation: This straightforward calculation shows how much of your property you actually own outright after accounting for your mortgage debt.
Details: Understanding your home equity is crucial for financial planning, refinancing decisions, accessing home equity loans, investment planning, and assessing your overall net worth. In Australia, home equity can be used for various purposes including home improvements, investment properties, or debt consolidation.
Tips: Enter your home's current market value and outstanding mortgage balance in Australian dollars. Use recent property valuations for accuracy. Both values must be positive numbers.
Q1: What is considered good home equity in Australia?
A: Generally, having 20% or more equity is considered good as it helps avoid lenders mortgage insurance (LMI). However, the more equity you have, the better your borrowing power.
Q2: How can I increase my home equity?
A: You can increase equity by making mortgage payments (reducing debt), property value appreciation through market growth, or home improvements that increase your property's value.
Q3: Can I access my home equity in Australia?
A: Yes, through home equity loans, line of credit facilities, or refinancing. Australian lenders typically allow you to borrow up to 80% of your property's value minus your current mortgage balance.
Q4: How often should I calculate my home equity?
A: It's recommended to review your home equity annually or when considering major financial decisions. Property values can change, and regular mortgage payments increase your equity over time.
Q5: What if my home equity is negative?
A: Negative equity occurs when your mortgage balance exceeds your property's value. This situation, while uncommon in stable markets, can limit your refinancing options and financial flexibility.