Calculating Your Home Equity

Calculating Your Home Equity

Home equity is the portion of your home that you’ve paid off — your stake in the property, as opposed to the lender’s. For many homeowners, this is their most valuable asset. And the best part is that it often increases without you having to do anything more than making your regular monthly mortgage payment.

So what is it exactly? 

Equity is the portion of the home that you truly own and does not need to be repaid to any lender. In other words, it is the appraised value of your home minus any outstanding mortgage and loan balances. In most cases, home equity builds over time as you pay down mortgage balances or add value to your home.

How is it calculated?

Current Appraised Value – Mortgage Loan Balance = Home Equity

Subtract the amount you owe on your home loan/s from its appraised value to get how much equity you have in your home.

Example:

Appraised Value is $500,000 – $230,000 Loan Balance = $270,000 in equity

How do you use your home’s equity to make renovations?

A loan (second mortgage) allows you to borrow a certain amount for your renovation. The equity in your home is used as collateral, giving you free access to spend the money on your home project.

A HELOC is typically a variable-rate line of credit based on your equity, that allows you to borrow and repay repeatedly.

You may also have the ability to refinance, which allows you to turn your equity into cash –  referred to as “cash-out” refinancing.  This gives you access to the equity without selling your home.

Talk to a Loan Officer to learn more about your options.

Related Posts

A Year-Round Guide to Home Maintenance: Monthly Tips for a Happy and Healthy Home
A Year-Round Guide to Home Maintenance: Monthly Tips for a Happy and Healthy Home

Owning a home comes with the responsibility of regular maintenance to ensure its longevity and comfort. Rather than tackling all tasks at once, a more effective approach is to break them down into manageable monthly segments. Let’s explore a year-round guide to home maintenance, with a different tip for each month tailored to the season, […]

January 19, 2024
Full Post
Thanksgiving Gratitude: A Heartfelt Message from Your Mortgage Lender
Thanksgiving Gratitude: A Heartfelt Message from Your Mortgage Lender

As the Thanksgiving season approaches, it’s a time to reflect on the many blessings in our lives. At the heart of this gratitude often lies our homes – the place where we find warmth, security, and love. We want to take a moment to express our heartfelt gratitude for the opportunity to help those families […]

November 21, 2023
Full Post
Preparing Your Home for Winter: Essential Steps for a Cozy Season
Preparing Your Home for Winter: Essential Steps for a Cozy Season

As the third week of November rolls around, it’s the perfect time to start thinking about preparing your home for the colder months ahead. Winter can be unpredictable, and the last thing you want is to be caught off guard by the dropping temperatures and adverse weather conditions. To help you get ready for the […]

November 09, 2023
Full Post

Connect With Us

  How Can We Help?