1. What is Home Equity?

Home equity represents the portion of your home that you truly own. It's calculated as the difference between your home's current market value and the outstanding balance on your mortgage. Positive equity indicates you own more of your home than you owe to the lender.

2. How Does the Calculator Work?

The calculator uses the home equity formula:

Where:

• \( Home\ Value \) — Current market value of your property
• \( Mortgage\ Balance \) — Remaining amount owed on your mortgage

Explanation: This simple subtraction gives you the net value you would receive if you sold your home and paid off your mortgage.

3. Importance of Home Equity Calculation

Details: Understanding your home equity is crucial for financial planning, refinancing decisions, home equity loans, and assessing your overall net worth. It helps homeowners make informed decisions about their largest financial asset.

4. Using the Calculator

Tips: Enter your home's current market value and remaining mortgage balance in currency units. Both values must be non-negative numbers. Use accurate, up-to-date figures for the most reliable results.

5. Frequently Asked Questions (FAQ)

Q1: What is considered good home equity?
A: Generally, having at least 20% equity is considered good as it eliminates private mortgage insurance and provides better loan terms.

Q2: How often should I calculate my home equity?
A: It's recommended to reassess your home equity annually or when significant changes occur in your local real estate market.

Q3: Can home equity be negative?
A: Yes, if your mortgage balance exceeds your home's market value, you have negative equity (often called being "underwater" on your mortgage).

Q4: How can I increase my home equity?
A: You can build equity by making mortgage payments, making home improvements that increase value, or through natural market appreciation.

Q5: What can I use home equity for?
A: Home equity can be used as collateral for loans, lines of credit, or can be accessed when selling the property.