How to Determine Home Equity

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Home equity is a simple calculation that the bank performs to determine the type of lending value that a person has on their home equity line of credit. Subtract out the first mortgage balance when determining home equity with help from a financial specialist in this free video on home loans and money management.

Part of the Video Series: Home Equity Lines of Credit
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Video Transcript

Hi, my name is Matt McKillen, I'm with Innovative Financial Group. The question I've been posed to today is how do you determine your home equity? Home equity is a basic simple calculation that the bank does to determine what type of lending value you have on your home equity line of credit. To give you an example, let's say your home is worth 200,000 dollars. What the bank does to calculate your equity position in the property is they subtract any existing liens that you may already owe on the property as in a first mortgage. So let's say that your first mortgage is 150,000 dollars and your home is appraised at or is valued at 200,000 dollars. By subtracting 150 that you already owe on your home, the balance or the difference between the two is 50,000 dollars. Now that determines how much equity that you have in your home and how much is actually available for use in a home equity line of credit. So for future when you're trying to figure out your equity position in your property, find out how much your home is at current market rates, subtract out the first mortgage balance you already owe and the difference is your equity. So that would be 50,000 on a 150,000 dollar loan on a 250,000 dollar home. Thanks again, my name is Matt McKillen with Innovative Financial Group.


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