How to Define Home Equity

A home's equity is a homeowner's most important asset. Home equity is also a key factor in figuring your net worth. To find the home equity of your home, subtract the remaining mortgage balance from the current value of your home. It sounds simple, but there are some very important steps that you need to take to know exactly home much equity there is in your home.

Difficulty: Easy

Instructions

1. Gather the basic data on the home loan. Contact your lender to get the balance of your loan. This number is crucial for calculating equity. Oftentimes, the balance is listed on the monthly statement. You may want to call anyway, to be sure that the statement is correct.

2. Hire an appraiser. A professional home appraisal is the best way to determine the home's current or market value, which is another essential number for determining equity. An appraisal will tell you whether your home has lost or gained value since the purchase date.

3. Subtract the balance of your mortgage loan from the appraised value of the home and you will know your home equity. Use this number when contemplating a home equity loan for remodeling or more personal issues such as debt consolidation.

4. Keep these numbers on hand and recalculate when needed. Home equity changes with the housing market in your area, so stay on top of the numbers to gauge just how the market is affecting your home. A slump will affect the value of the home and therefore the amount of equity.

Who Can Help Sponsored

• A Bad Credit Score is 598 or Below. Checking your own Credit Report won't affect your score! See instantly for $0 by Experian® www.FreeCreditReport.com