Use this calculator to quickly determine your current home equity, outstanding mortgage balance, or the estimated market value of your home by providing any two of the three required variables.
Mortgage Home Equity Calculator
Calculated Result
Result for [Variable]
Calculation Steps
Mortgage Home Equity Formula
Formula Sources: Investopedia, CFPB
Variables Explained
- Current Home Value ($V$): The estimated market price of your home today. This should be based on recent appraisals or comparable sales (comps).
- Outstanding Mortgage Balance ($D$): The total amount of principal remaining on your mortgage loan, including any home equity loans or HELOC balances.
- Current Home Equity ($E$): The actual portion of your home that you currently own, free and clear of debt. This is the calculated result.
What is Mortgage Home Equity?
Home equity represents the portion of your property that you own outright, calculated as the difference between your home’s current market value and the amount you still owe on your mortgage(s). As you pay down your mortgage principal and as the property’s value appreciates, your home equity increases. It is an extremely important asset for homeowners.
Having sufficient home equity is necessary to qualify for certain financial products, such as Home Equity Lines of Credit (HELOCs) or Home Equity Loans. Lenders typically require you to maintain a certain Loan-to-Value (LTV) ratio, meaning they only lend against a portion of the total equity you have built up. Monitoring this number is key to making informed refinancing and borrowing decisions.
How to Calculate Home Equity (Example)
Follow these steps to calculate your home equity:
- Determine Market Value: Obtain a reliable estimate of your home’s current market value. For instance, let’s assume your home is valued at $550,000.
- Find Outstanding Debt: Look up your latest mortgage statement to find the current principal balance. Assume your outstanding balance is $325,000.
- Subtract Debt from Value: Subtract the debt from the value: $550,000 (Value) – $325,000 (Debt) = $225,000.
- Identify Equity: Your resulting Home Equity is $225,000.
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Frequently Asked Questions (FAQ)
Q: How fast does home equity grow?
A: Home equity grows through two main mechanisms: principal payments on your mortgage and market appreciation of your property. The speed depends on your amortization schedule and local real estate trends.
Q: Can my home equity be negative?
A: Yes, this is known as being “underwater” or having negative equity. It occurs when the outstanding mortgage balance is higher than the current market value of the home, typically due to a sudden drop in property values.
Q: How do I use my home equity?
A: The most common ways to use equity are through a cash-out refinance, a Home Equity Loan (HEL), or a Home Equity Line of Credit (HELOC) to fund major expenses like renovations or education.
Q: Is property value the same as home equity?
A: No. Property value is the total estimated worth of the home. Home equity is only the portion of that value that is debt-free (Value minus Debt).