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Home Equity Formula:
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Home equity represents the portion of your property that you truly own. It's calculated as the difference between your home's current market value and the outstanding balance on your mortgage. In Australia, home equity is a key financial asset that can be used for various purposes.
The calculator uses the simple home equity formula:
Where:
Explanation: This straightforward calculation shows how much of your property you actually own after accounting for your mortgage debt.
Details: Understanding your home equity is crucial for financial planning, refinancing decisions, accessing equity loans, investment opportunities, and assessing your overall net worth in the Australian property market.
Tips: Enter your home's current market value and outstanding mortgage balance in Australian dollars. Both values must be positive numbers. Use recent property valuations for accurate results.
Q1: What is considered good home equity in Australia?
A: Generally, having 20% or more equity is considered good as it helps avoid Lenders Mortgage Insurance (LMI). Higher equity provides better borrowing power.
Q2: How often should I calculate my home equity?
A: It's recommended to reassess your home equity annually or when there are significant changes in property values or mortgage balances.
Q3: Can I access my home equity in Australia?
A: Yes, through equity loans, line of credit facilities, or refinancing. Most lenders allow you to borrow up to 80% of your property's value minus your current mortgage.
Q4: What factors affect my home's value in Australia?
A: Location, property condition, market trends, interest rates, and local infrastructure developments all impact your home's current market value.
Q5: Is negative equity possible?
A: Yes, if your mortgage balance exceeds your home's current value. This situation, known as being "underwater," can occur during property market downturns.