Home Equity – Portion of the Home You Own
What is home equity? Home equity is the portion of your home’s value that’s not ‘secured by any liens.’ In other words, it’s the portion you own free and clear because it’s not owed to a mortgage lender. For example, if your home is worth $250,000 and you owe $100,000 on your mortgage, you have $150,000 of equity. Search homes for sale in Flying Horse, Colorado Springs, CO here: http://www.rehava.com
Home equity is a valuable asset by itself. But equity can also be tapped to help grow your wealth, if you know how to use it correctly. Here’s how it works.
How to calculate home equity
You need to know only two things to calculate your own equity:
- Your home’s current market value
- Your total outstanding mortgage balance (primary mortgage plus second mortgage, if you have one)
From here, the equation is simple:Home Value – Total Mortgage Balance = Your Home Equity
Here’s a very basic example of the home equity calculation in practice:
- Home value: $200,000
- Mortgage loan balance: $100,000
- Home equity: $100,000 ($200,000 – $100,000)
Normally, homeowners build equity in two ways.
First, the mortgage balance falls a little each month as you pay down your debt. The lower your mortgage loan amount, the greater your equity.
Second, rising home prices typically push up the market value of the property. As your home’s value rises, it automatically increases your equity.
Finding your mortgage balance and home value
Finding the outstanding balance on your home loan is easy. You can probably log onto your mortgage account for an exact and up-to-date figure. Or you can check your most recent paper statement.
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