1. What is Home Equity?

Home equity represents the portion of your property that you truly "own." It's the difference between your home's current market value and the outstanding balance of all liens (like your mortgage) on the property.

2. How Does the Calculator Work?

The calculator uses the simple equity formula:

Where:

• \( Home\ Value \) — Current market value of your home
• \( Mortgage\ Balance \) — Remaining principal on your mortgage

Explanation: This calculation shows how much of your home's value you've paid for through down payments and mortgage payments.

3. Importance of Calculating Equity

Details: Knowing your home equity is important for refinancing, taking out home equity loans or lines of credit, selling your home, or understanding your net worth.

4. Using the Calculator

Tips: Enter your home's current market value and remaining mortgage balance in USD. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Can equity be negative?
A: Yes, if your mortgage balance exceeds your home's value (called being "underwater" or "upside-down" on your mortgage).

Q2: How often should I calculate my home equity?
A: It's good to check annually or when considering major financial decisions involving your home.

Q3: Does home equity include appreciation?
A: Yes, as your home's market value increases (through appreciation or improvements), your equity grows.

Q4: How can I increase my home equity?
A: By paying down your mortgage, making home improvements, or through market appreciation.

Q5: Is home equity the same as cash?
A: No, equity represents value that could potentially be accessed through selling or borrowing, but it's not liquid cash.