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Total Equity Formula:
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Total Equity (TE) in real estate represents the actual ownership value a homeowner has in their property. It's calculated by subtracting the outstanding mortgage balance (M) from the property's current market value (MV). This figure indicates how much of the property you truly own outright.
The calculator uses the simple equity formula:
Where:
Explanation: This straightforward calculation shows the net value you would receive if you sold the property and paid off the remaining mortgage.
Details: Knowing your total equity is crucial for financial planning, refinancing decisions, home equity loans, selling considerations, and understanding your overall net worth. It helps homeowners make informed decisions about their largest financial asset.
Tips: Enter the current market value of your property and the remaining mortgage balance in dollars. Both values must be positive numbers. For accurate results, use recent property appraisals for market value and current mortgage statements for the balance.
Q1: How often should I calculate my home equity?
A: It's recommended to calculate your home equity annually or whenever there are significant changes in property values or mortgage balances.
Q2: What factors affect market value?
A: Location, property condition, market trends, recent renovations, and comparable sales in your area all influence market value.
Q3: Can equity be negative?
A: Yes, if the mortgage balance exceeds the market value (known as being "underwater" or having negative equity).
Q4: How can I increase my home equity?
A: Through mortgage payments, property value appreciation, and home improvements that increase market value.
Q5: Is home equity the same as cash?
A: No, home equity represents ownership value that can be accessed through selling, refinancing, or home equity loans, but it's not liquid cash.