How to Figure Equity in Your Home
The equity you have in your home is the difference between what it is worth today and the amount that you owe. The larger your equity, the more options you have. For instance, you can refinance your mortgage and take out additional cash. Or you can effectively reduce your monthly payment by eliminating the Private Mortgage Insurance you were required to have when you made your loan. And if you were to sell your home, the equity you have in it represents what you would receive.
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Instructions
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Ask for a formal appraisal to be made of your home. This method will cost you several hundred dollars, but there is no more accurate way to determine the value of your house. Once you have the appraisal in hand, simply reduce the value of your home as stated in the appraisal by the amount that you owe. If you were to sell your home at the price determined by the appraisal and pay off your mortgage, the remaining figure is approximately what you would receive.
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Talk with a local real estate agent who specializes in homes in your area. Such an agent should be able to approximate the value of your house. This method will cost you nothing, but you will have an educated opinion of your house's value.
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Do your own research to find out the value of your house. Your county courthouse has an abundance of information about homes that have sold in your neighborhood. Based on your knowledge, check the selling prices of homes that have recently sold. This is the least reliable method, because it does not take into account changes that have taken place recently. For instance, a home that may have sold for $200,000 three years ago could sell for much more or less today, depending on the economy. Also, you can go to Zillow.com (see Resources below), a website that will enable you to approximate the value of your home.
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Save money by knowing your equity before you apply for a new loan. Many lenders will charge you a fee for applying for a loan that you will have to pay whether you get the loan or not. By using any of the methods given above to determine your home's value, you will be able to see whether you have enough equity built up to warrant a new loan.
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