House Equity Calculator
Determine your current home equity and loan-to-value ratio instantly.
Understanding House Equity: The Key to Your Wealth
House equity is the difference between the current market value of your property and the total amount you owe on any mortgages or liens secured against it. It represents the portion of the property that you truly "own." As you pay down your mortgage or as property values in your area increase, your equity grows.
How to Calculate Your House Equity
The math behind home equity is straightforward but powerful. To find your equity, use the following formula:
Equity = Current Market Value – Total Debt
For example, if your home is valued at $500,000 and you owe $350,000 on your primary mortgage plus $10,000 on a home equity line of credit (HELOC), your equity is $140,000 ($500,000 – $360,000).
Why Knowing Your Equity Matters
- Refinancing Options: Lenders typically require at least 20% equity to refinance into a lower rate without paying Private Mortgage Insurance (PMI).
- Access to Capital: High equity allows you to apply for Home Equity Loans or HELOCs to fund renovations, education, or debt consolidation.
- Selling Potential: Knowing your net equity helps you understand how much cash you will walk away with after paying real estate agent commissions and closing costs.
- Financial Security: Equity is a significant part of the average homeowner's net worth and serves as a long-term investment vehicle.
Factors That Increase Your Equity
There are two primary ways equity grows. The first is Market Appreciation, which occurs when the demand for housing in your area increases or the economy grows, causing your home's value to rise without any action on your part. The second is Principal Reduction, which happens every time you make a monthly mortgage payment, slowly chipping away at the debt balance.
The Difference Between Gross and Net Equity
While gross equity is the paper value of your ownership, Net Equity is a more realistic figure for those planning to sell. Net equity subtracts selling expenses, such as the standard 5-6% agent commission, transfer taxes, and legal fees. Our calculator includes a field for these costs to provide a clearer picture of your liquidable wealth.