Home equity is the portion of your home's value that you truly own. It's calculated by taking the current market value of your home and subtracting any outstanding debts secured by the property, such as your primary mortgage, home equity loans, or lines of credit (HELOCs).
The Formula:
Home Equity = Current Market Value of Home - (Total Outstanding Mortgage Balance + Total Amount of Other Home Liens)
For example, if your home is currently worth $500,000, you have a primary mortgage balance of $300,000, and a home equity line of credit (HELOC) balance of $50,000, your home equity would be:
Refinancing: Higher equity can give you access to better interest rates and terms when refinancing your primary mortgage.
Home Equity Loans & HELOCs: Equity serves as collateral for borrowing against your home. A significant amount of equity makes it easier to qualify for these loans for renovations, debt consolidation, or other major expenses.
Selling Your Home: The equity you've built up is the profit you'll receive after paying off all debts when you sell your home.
Financial Health Indicator: Tracking your home equity over time can be a good indicator of your overall financial progress and the performance of your real estate investment.
Factors Affecting Home Equity
Market Value Fluctuations: Real estate markets can go up or down. An increase in your home's market value increases your equity, while a decrease reduces it.
Principal Payments: Each mortgage payment you make reduces your outstanding loan balance, thereby increasing your equity.
Home Improvements: Strategic renovations can increase your home's market value, potentially boosting your equity.
Additional Borrowing: Taking out a home equity loan or HELOC increases your debt against the property, reducing your equity.
This calculator provides a quick estimate of your home equity. For precise figures, consult your latest mortgage statements and consider a professional home appraisal.
function calculateEquity() {
var currentValue = parseFloat(document.getElementById("currentHomeValue").value);
var mortgageBalance = parseFloat(document.getElementById("outstandingMortgageBalance").value);
var otherLiens = parseFloat(document.getElementById("otherHomeLiens").value);
var equityValueElement = document.getElementById("equityValue");
if (isNaN(currentValue) || isNaN(mortgageBalance) || isNaN(otherLiens)) {
equityValueElement.textContent = "Please enter valid numbers.";
equityValueElement.style.color = "#dc3545";
return;
}
if (currentValue < 0 || mortgageBalance < 0 || otherLiens < 0) {
equityValueElement.textContent = "Values cannot be negative.";
equityValueElement.style.color = "#dc3545";
return;
}
var totalDebt = mortgageBalance + otherLiens;
var equity = currentValue – totalDebt;
if (equity < 0) {
equity = 0; // Equity cannot be negative in this context; it means you owe more than the home is worth.
}
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 0,
maximumFractionDigits: 0
});
equityValueElement.textContent = formatter.format(equity);
equityValueElement.style.color = "#28a745"; // Success Green
}