1. What is Home Equity?

Home equity represents the portion of your home's value that you truly "own" - it's the difference between your home's 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 home equity formula:

Where:

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

Explanation: This calculation shows how much of your home you actually own versus what you still owe to the bank.

3. Importance of Home Equity Calculation

Details: Knowing your home equity is crucial for financial planning, qualifying for home equity loans or lines of credit, and 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 home equity be negative?
A: Yes, if you owe more on your mortgage than your home is worth (called being "underwater" 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 like refinancing or taking out a home equity loan.

Q3: Does home equity include my down payment?
A: Yes, your initial down payment contributes to your starting equity, and each mortgage payment increases it further.

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

Q5: Is home equity the same as cash?
A: No, it's not liquid cash. You'd need to sell your home or borrow against the equity to access it.