How to Determine Home Equity

If you took out a mortgage to pay for your home some time back, there may be extra money hiding within its walls. Once the value of your home has increased above what you owe, you have what is known as home equity. How much you have is easy to calculate.

Difficulty:

Easy

Instructions

1. Determine the current market value of your home. You can find this information by looking at your most recent tax assessment, or by comparing your home to other homes that have sold in your neighborhood. You can also ask a real estate agent for an opinion.

2. Schedule an appraisal. If you have questions about the current market value of your home, an appraiser can give you a specific answer. The appraisal can also be used as proof if you decide to get a home equity loan or a home equity line of credit.

3. Find out how much you owe on your mortgage. Call your lender and determine what the pay off amount would be.

4. Account for all other finances that impact your home. If you have a second mortgage or a lien on your home, the balance on those would also be factored in.

5. Subtract the balance of your loans from the current market value. This determines the amount of equity you have in your home. If you want a home equity loan, there are some restrictions. Most lenders will only lend 75% to 80% of your home's total equity. So if your equity is $40,000, you should be able to get a loan for around $30,000.