Home
Back
Home Equity Percentage Formula:
| From: | To: |
Home equity percentage represents the portion of your home that you truly own, calculated as the difference between your home's current market value and your outstanding mortgage balance, expressed as a percentage of the home's value.
The calculator uses the home equity percentage formula:
Where:
Explanation: The formula calculates what percentage of your home's value you own outright, after accounting for your mortgage debt.
Details: Knowing your home equity percentage is crucial for refinancing decisions, home equity loans, selling considerations, and understanding your overall financial position. A higher equity percentage indicates stronger financial stability.
Tips: Enter your home's current market value and outstanding mortgage balance in dollars. Both values must be positive, and the mortgage balance cannot exceed the home value.
Q1: What is considered a good equity percentage?
A: Generally, 20% or higher is considered good, as it eliminates private mortgage insurance (PMI) requirements. Above 50% indicates strong equity position.
Q2: How often should I calculate my home equity percentage?
A: It's recommended to recalculate annually or when considering major financial decisions like refinancing or home equity loans.
Q3: Does home improvement affect equity percentage?
A: Yes, improvements that increase your home's value will improve your equity percentage, unless you take out additional loans against the property.
Q4: What if my mortgage balance is higher than my home value?
A: This situation is called being "underwater" or having negative equity. The calculator will show a negative percentage in such cases.
Q5: Can I use this for investment properties?
A: Yes, the formula works for any real estate property where you want to calculate the percentage of ownership relative to debt.