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How do I Determine my Home Equity?

Jeremy Laukkonen
Jeremy Laukkonen

There are a number of different ways to determine your home equity, some of which can be more precise than others. The first step may be to find out how much your home is worth, which can involve hiring an appraiser to get a precise figure or looking at local sales to get an approximate value. You may want to find out how much is still owed on your mortgage. The best way to get this number is to contact your lending institution, though you can also get a ballpark figure by using an online mortgage calculator. By subtracting the amount still owed on your loan from the current value of your home, it may be possible to get a good idea of how much home equity you have built.

Home equity can be accrued through paying down the loan principal or if the property value increases. The amount owed on your mortgage can decrease when timely payments are made each month, while a variety of both internal and external factors can affect the value of the real estate. Property values may fluctuate in either direction, so certain circumstances may result in negative equity. This typically occurs when a real estate market experiences a downswing, resulting in a home being worth less than was paid for it.

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In order to determine your home equity, the first step is usually to find out how much your property is worth. Appraisers can typically provide a well researched figure, though they will charge a fee for their work, and another appraisal may be required if you apply for an equity loan later on. A less precise method for determining what your home is worth can involve doing the research yourself. Home sales data is often a matter of public record, allowing you to compare the prices of local homes that have similar features to your own. If you use this approach, you may want to consider the fact that different locations, ages, and room configurations can all affect value.

After you determine what your home is worth, you will typically need to find out the amount you owe on your mortgage. Your lender will typically be able to tell you how much principal and interest you have paid and the amount of your balance. They may also be able to provide you with the documentation to figure it out on your own. An alternative method is to use a mortgage calculator. This process typically involves inputting your original loan value and interest rate, and then determining how much principal has been paid already.

The equity you have in your home is a function of how much the real estate is worth and the amount you owe on any mortgages or liens. Once you have both of these figures, you can subtract the amount you owe from the value of the property. If it is a positive number, it represents the home equity that you may be able to secure a loan for.

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