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Home Equity Percentage Formula:
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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 total value you own outright, excluding the portion still owed to the mortgage lender.
Details: Knowing your home equity percentage is crucial for financial planning, refinancing decisions, home equity loans, and understanding your net worth. It helps determine borrowing capacity and assess financial health.
Tips: Enter your home's current market value and remaining mortgage balance in dollars. Both values must be positive numbers, and the home value should be greater than the mortgage balance for meaningful results.
Q1: What is considered a good home equity percentage?
A: Generally, 20% or more is considered good as it eliminates private mortgage insurance (PMI). Above 50% indicates strong equity position.
Q2: How often should I calculate my home equity?
A: It's recommended to recalculate annually or when significant changes occur in property values or mortgage balances.
Q3: Does home improvement affect equity percentage?
A: Yes, improvements that increase your home's value will boost your equity percentage, provided your mortgage balance doesn't increase proportionally.
Q4: What if my mortgage balance exceeds home value?
A: This situation is called being "underwater" on your mortgage, resulting in negative equity (0% in our calculation).
Q5: Can I use estimated home value for calculation?
A: While exact appraisal is best, online estimates or comparative market analysis can provide reasonable approximations for regular monitoring.