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 home equity equation:

Where:

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

Explanation: This simple subtraction gives you the dollar amount of equity you've built up in your home.

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 your mortgage balance exceeds your home's value (called being "underwater" on your mortgage).

Q2: How often should I calculate my home equity?
A: It's good practice to check annually or whenever your home's value changes significantly.

Q3: Does home equity include my down payment?
A: Yes, your initial down payment contributes to your starting equity, and payments since then have built 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 profit if I sell?
A: No, selling costs (5-10% of sale price) would reduce your actual proceeds from a sale.