Your Home Equity Could help Fund Your Next Home Purchase
Whether you’re planning on staying in your home for the next 10 years or selling in the next 6 months, it’s a good time to check your home equity.
In the simplest terms, your home’s equity is the difference between how much your home is worth and how much you owe on your mortgage.
Look at this example:
Let's say you bought a $250,000 house with a down payment of 7% (approximately $17,500), resulting in a loan amount of $232,500. By securing a 30-year fixed-rate mortgage at 4.5%, your monthly mortgage payment is $1,178 without taxes and insurance.
To calculate your home equity, subtract the amount of the outstanding mortgage loan from the CURRENT MARKET VALUE for the property.
At the time you buy, your home equity would be $17,500 or the amount of your down payment.
Refresher: home equity is how much money you have in your home AKA the amount of your home that you actually own. An easy way to think of it is that if you were to sell today and pay off your mortgage, the equity in your home is how much money you’d walk away with.
Home equity is easy to calculate! All you do is make your home’s current market value (you can check with your agent for an accurate valuation, or if you want rough numbers, you can find an online estimate), then subtract how much you have left on your mortgage.
For example, if your home is NOW worth $350,000 right now, and you have $175,000 left on your mortgage, you would have $175,000 in equity.
Because home values have been rising, you might find that the equity in your home is much more than you’ve paid into your mortgage!
If you need some help calculating your home’s equity or want to talk about what to do with that equity, send over a DM!
For perspective, once you have paid off your mortgage you’ll have 100% equity in the home.