1. What is Home Equity?

Home equity represents the portion of your property that you truly "own" - 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 home equity formula:

Where:

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

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

3. Importance of Home Equity Calculation

Details: Knowing your home equity is crucial for financial planning, refinancing decisions, home equity loans, or when considering selling your property.

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" or "upside-down" on your mortgage).

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

Q3: Does home equity include my down payment?
A: Indirectly yes, as your initial down payment contributed to the equity you built from the start.

Q4: How can I increase my home equity?
A: By paying down your mortgage principal and/or through home value appreciation (market increases or home improvements).

Q5: Is home equity the same as cash?
A: No, it's not liquid. You'd need to sell your home or take out a loan/line of credit against the equity to access cash.