Do you want to learn how to calculate how much home equity you have? If yes then you're in the right place. In this article, I will show you how to find out how much-untapped cash you have in your home. 

A lot of people believe that homeowners know how much they have in home equity, but that is not true because they need to gain knowledge in knowing how much home equity they have or even how it works. This is why I'm taking the time to explain briefly how home equity works.

With the right knowledge of home equity, you can know the value of your home. This will allow you to calculate it by subtracting your outstanding mortgage from the property's market value.

Before I dive into how you can calculate how much home equity you have, let us look at some important stuff you need to know about home equity.

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How Home Equity Is Calculated (Learn To Calculate How Much Home Equity You Have )

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What Is Home Equity?

Home Equity can be seen as the value of a home and homeowner controls when compared to how much the mortgage loan lender controls.

This means that when you make a payment on any of your mortgages, you are automatically reducing the principal, which means that you're building equity. If you're yet to complete your mortgage payment, then you're just owing a percentage of your home. 

How Much Home Equity Do You Have?

To know or have a rough estimate of how much home equity you have, you need to understand that your home equity value is the difference between the current market value of your home and the total sum of debts registered against it.

In a practical example, as a borrower through a home equity loan, the credit available to you will be determined by how much equity you have.

Let's say the value of your home is $300k and you are still owing the sum of $150k on your current mortgage, this means that to get the overall equity of your home, you'll need to subtract your remaining mortgage from the home's values.

Knowing the real value of your home is very important if you really want to determine equity.

To ascertain the base on official valuation, you can contact a real estate appraiser to evaluate the worth of your home in the current market. Trying to get the value yourself is just like having an estimate of what to expect. Another way to know that is to ensure that you compare your home with comparable home sales in your vicinity by looking at them online. Most of them have been evaluated and the price will be online for all interested buyers to see.

With all this said, have it at the back of your mind that all of these estimations are not accurate, and they exist there only to give you an idea of the current worth of your home.

How Can Home Equity Be Used?

As I have said before, equity is a very important tool that comes with amazing benefits when it comes to owning a home of your own.

With your current equity, you can use it to get a better home or even a bigger one. With the equity, you can pay for major home improvements, consolidate other debts, or even plan for retirement.

If you're wondering what other way equity can be used effectively, then keep reading.

Below are some major ways equity can be used.

Equity Can Be Use For the Acquisition Of a New Home

It is everyone's dream to move into a bigger and better apartment. But the cost of financing a new apartment can be discouraging sometimes. This is why you see families living in old apartments without moving out. Not because they love it, but because there was no means of financing a new one.

As an individual that has spent a couple of years in an old house, and your family keeps growing as time passes by, or maybe you got a better job that warrants you to move from your current location to another, and you think of selling off your home to get a new one at your new location, then equity can come handy for you to make that move.

Equity Can Be Used For Retirement

Exploring a reverse mortgage is another great way you can use to plan for your retirement if you're 62 or even older.

Having a reverse mortgage means that you'll stop making monthly payments for your mortgage, instead, you'll be paid based on the equity of your home.

Age is one factor that will determine how much you can borrow together with the equity of your home. These proceeds can be received all at once in a lump sum, or probably, you can get it as a line of credit, or a regular monthly repayment. It all depends on you.

As the owner of a home, you are not expected to pay back your loan unless you choose to sell off your home, move out for a duration of 6 months out of a 12-month calendar year or you passed away. If for any reason you decided to sell your home, then you're expected to use the profits from your home sale to pay back the loan.

But in the case of passing away, any of your heirs may have options of either selling the home and keeping the profit after the loan has been paid off, refinance it into refinance into a regular forward mortgage, or walking away and letting the lender sell the home.


I have explained everything you need to know about how to calculate home equity in the article above. I hope you got a better understanding of the term.

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