# How to Calculate Your Home Equity and Value

Posted by Jeffery Sweet on Thursday, July 25th, 2019 at 10:42am

Home equity is one of the things most homeowners may not know, which makes calculating it complicated. To put it plainly, home equity is the portion of your home that you truly own, considering that you have borrowed money toward buying it. The remaining portion is still owned by your lender until you have fully paid your debt. Home equity is often used to help homeowners determine how much they can sell their homes for.  It also increases as you pay off your existing loan and as the current value goes up. It is also used by some people to calculate how much they can take out a home equity loan.

## Determining Your Home’s Current Home Equity Value

If you are thinking of selling your home or are wondering if you can take out a home equity loan, calculate your home equity before proceeding. Here’s how:

1. Determine the current market value of your home – Finding the current value of your home is easy. Just head over to our CMA (Comparative Market Analysis) page and input your address.  This will pull up homes that sold in the area.  For example, if you live in Fruitland, then the sold homes that you see your home compared to will only be Fruitland ID homes for sale
2. Subtract how much you still owe on your home – If you still owe money on mortgages and loans, then your home equity is the remaining amount after you’ve deducted these amounts from the price of your home. For example, if your home is worth \$300,000, and you still owe \$120,000 on it, the home’s equity is \$180,000.

Now that you know what home equity is and how to calculate it, here are some of the questions people ask about it:

### What can I do with my home equity?

Since your home’s equity is considered a financial asset, there is a lot you can do with it. For one, you can use it to take out a home equity loan. You can then use this loan to do things like improving your home so its value increases further, or buying a new home as an investment, and even putting up a business (although this is NOT recommended). A home equity loan is sometimes called a second mortgage. So, unless you are sure you can pay off both mortgages without a hitch, it might be wise to avoid taking one out just yet.

### Is it possible for a house to have negative equity?

Just as it is possible for your home to increase in value, it is also possible for it to decrease in value. If your home is in an area that is depreciating in value, you might end up with a home that has negative equity. How does this happen? Using the same calculations as above, you simply deduct the amount you’ve already paid on your home from the current value of your property. If the current value is lower than what you already paid for, you have negative equity.   After the crash around 2007-8 many people did what is called a "short sale" in order to sell their home for less than it's worth.

### Why do people try to determine their home’s equity?

The main reason why people try to find out how much they have in home equity is to determine how much they can take out for a home equity loan. Another reason is to determine how much profit they will make after they sell their house and pay off their existing mortgage.

### Why is home equity important?

You should always remember that your home is an asset. As you pay off the loan that you owe on the home, this asset gains value. This is something you can leverage when you need a sudden and large influx of cash. If you hear news of a possible downtrend in the prices of properties in your area, you might want to consider selling before it goes down further and you end up with negative equity.