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, excluding the portion still owed to the mortgage lender.
Details: Knowing your home equity percentage is crucial for determining eligibility for home equity loans, refinancing options, and understanding your overall financial position. Lenders typically require 15-20% equity for home equity loans.
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) and qualifies you for most home equity products.
Q2: How often should I calculate my home equity?
A: It's recommended to recalculate annually or when considering major financial decisions like refinancing or taking out a home equity loan.
Q3: Does home improvement affect equity percentage?
A: Yes, improvements that increase your home's value will increase your equity percentage, assuming your mortgage balance remains the same or decreases.
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 property where you need to calculate the equity percentage based on current value and outstanding mortgage.