1. What is Home Equity?

Home equity represents the portion of your home's value that you truly "own." It's calculated by subtracting any outstanding mortgage balances from the current market value of your property.

2. How Does the Calculator Work?

The calculator uses the simple home equity equation:

Where:

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

Explanation: This calculation shows how much of your home's value you would keep if you sold the property and paid off the mortgage.

3. Importance of Home Equity Calculation

Details: Knowing your home equity is important for financial planning, applying 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: How often should I calculate my home equity?
A: It's good practice to calculate your home equity annually or whenever your home's value changes significantly.

Q2: Can home equity be negative?
A: Yes, if your mortgage balance exceeds your home's value (known as being "underwater" on your mortgage).

Q3: How can I increase my home equity?
A: By paying down your mortgage principal and/or through appreciation in your home's value.

Q4: Is home equity the same as cash?
A: No, home equity represents value that could be converted to cash by selling the home or borrowing against it.

Q5: What's the difference between home equity and net proceeds from sale?
A: Net proceeds would subtract additional costs like realtor fees, closing costs, and any outstanding liens.