1. What is Home Equity?

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. In New Zealand, building home equity is a key financial goal for many homeowners.

2. How Does the Calculator Work?

The calculator uses the simple home equity equation:

Where:

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

Explanation: The equation calculates how much of your property you actually own after accounting for your mortgage debt.

3. Importance of Home Equity Calculation

Details: Knowing your home equity is crucial for financial planning, refinancing decisions, applying for home equity loans, and understanding your net worth. In New Zealand, equity can be used for property investment or other financial opportunities.

4. Using the Calculator

Tips: Enter your home's current market value in NZD and your outstanding mortgage balance in NZD. Use recent property valuations for accurate results. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is considered good home equity in NZ?
A: Generally, having 20% or more equity is considered healthy. This helps avoid Lenders Mortgage Insurance (LMI) and provides better loan terms.

Q2: How can I increase my home equity?
A: Through mortgage repayments, property value appreciation, and home improvements that increase your property's value.

Q3: Can I have negative equity?
A: Yes, if your mortgage balance exceeds your home's value. This situation is called being "underwater" on your mortgage.

Q4: How often should I calculate my home equity?
A: It's good practice to review your equity position annually or when considering major financial decisions involving your property.

Q5: What can I use home equity for in New Zealand?
A: Common uses include home renovations, investment properties, debt consolidation, education expenses, or starting a business.