1. What is Home Equity?

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.

2. How Does the Calculator Work?

The calculator uses the home equity equation:

Where:

• \( E \) — Home equity (currency)
• \( V \) — Current home value (currency)
• \( B \) — Outstanding mortgage balance (currency)

Explanation: This simple calculation shows how much of your home you actually own versus how much you still owe to the lender.

3. Importance of Home Equity Calculation

Details: Knowing your home equity is crucial for financial planning, refinancing decisions, home equity loans, selling your property, and understanding your net worth.

4. Using the Calculator

Tips: Enter your home's current market value and your remaining mortgage balance. Both values should be in the same currency. Use realistic market valuations for accurate results.

5. Frequently Asked Questions (FAQ)

Q1: What is considered good home equity?
A: Generally, having 20% or more equity is considered healthy. This allows you to avoid private mortgage insurance and gives you 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: Can home equity be negative?
A: Yes, if you owe more on your mortgage than your home is worth, this is called being "underwater" or having negative equity.

Q4: How often should I calculate my home equity?
A: It's good practice to recalculate annually or when considering major financial decisions like refinancing or taking out a home equity loan.

Q5: What can I use home equity for?
A: Home equity can be used for home improvements, debt consolidation, education expenses, or other major purchases through home equity loans or lines of credit.