1. What is Home Equity?

Home equity represents the portion of your home that you truly own - the difference between your home's current market value and the outstanding balance on your mortgage. It's essentially the amount of money you would receive if you sold your home and paid off your mortgage.

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 formula calculates the net value you have built up in your property by subtracting what you owe from what your home is worth.

3. Importance of Home Equity Calculation

Details: Knowing your home equity is crucial for financial planning, qualifying for home equity loans or lines of credit, refinancing decisions, and understanding your overall net worth. It helps determine how much borrowing power you have against your property.

4. Using the Calculator

Tips: Enter your home's current market value and your remaining mortgage balance in dollars. Both values must be positive numbers. For accurate results, use recent property valuations and current mortgage statements.

5. Frequently Asked Questions (FAQ)

Q1: What is a home equity mortgage?
A: A home equity mortgage (or home equity loan) allows you to borrow against the equity you've built up in your home, typically at a lower interest rate than unsecured loans.

Q2: How much equity can I borrow?
A: Most lenders allow you to borrow up to 80-85% of your home's value minus your mortgage balance, but this varies by lender and your financial situation.

Q3: Does home equity always increase?
A: Not necessarily. Home equity can decrease if property values decline or if you take out additional loans against your home. It increases as you pay down your mortgage and when property values appreciate.

Q4: What's the difference between home equity and home value?
A: Home value is what your property is worth on the market. Home equity is the portion of that value that you actually own after subtracting your mortgage debt.

Q5: Can I have negative home equity?
A: Yes, if your mortgage balance exceeds your home's current market value, you have negative equity (often called being "underwater" on your mortgage).