How To Calculate Home Equity

Home equity is determined by subtracting the amount you still owe on your mortgage from the current market value of your home. It will tell you how much you could make from selling your home, or how big of a home equity loan you can take out. Your home equity will increase as you pay off your loan, or as your home increases in value. Here’s how to determine home equity.

1. Find your home’s current market value.

The price you paid for your home may not be the current value of your home. To calculate your home equity, you will need the most up-to-date estimate on your home’s worth. You can find that information by typing your home address into the search box on Housevalues.live, and then viewing the page with all the details on your home. An estimated value of your home, called the Redfin Estimate, is displayed next to the last-sold price. You can also contact a Redfin real estate agent to discuss what your home is worth.

2. Subtract your mortgage balance.

Once you have the current market value of your home, subtract the amount you still owe on your home mortgage and related loans from the estimate. This will reveal your current home equity.

3. See what you can earn.

Regardless of your home’s current market value and your outstanding loans, you’re guaranteed to save money if you sell your home with a House Values partner real estate agent.

Commonly Asked Home Equity Questions

What is home equity?

Home equity is the amount of your home that you actually own.

How is home equity calculated?

Home equity is calculated by subtracting the amount you still owe on your mortgage from the current market value of your home.

Can you have negative equity?

Yes. With standard loans, your home equity will increase over time. With negative-amortizing loans — a loan with monthly payments less than the interest rates — your equity decreases over time as your owed balance increases.

It is also important to remember that home equity fluctuates depending on current market conditions. If your $500,000 home increases in value to $600,000, your equity with a $400,000 loan is $200,000. If your $500,000 home decreases in value to $300,000, your equity with a $400,000 loan will turn into a negative $100,000 equity.

Can you increase your home equity?

Yes! You can take steps to improve your home equity by performing touch ups and making modern updates. Learn how to increase your home appraisal value.

What Are Home Equity Loans?

If you’re not interested in selling just yet, you can also use your home equity to take out a loan. Get in touch with an agent in your area for a free consultation.

Home Equity Line of Credit (HELOC)

Using a predetermined line of credit, HELOCs allow you to withdraw funds on an as-needed basis for a designated period of time (known as a draw period). Draw periods typically last between 5 to 25 years, with the repayment period beginning as soon as it ends. HELOCs give you the benefit of a flexible schedule, but interest rates vary from month to month and funds can be frozen without warning if your home value drops. This loan is best if you need various loan amounts for multiple projects.

A House Values a real estate agent can help you evaluate the pros and cons of taking out a home equity loan for home improvement projects before you sell. They can also help you get an accurate estimate of the current value of your home. Get in touch with an agent in your area for a free consultation.

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