How Much Equity Do I Have?
Whether you’re getting ready to buy your first home or you’ve been a homeowner for years, the question of home equity is vital to your financial planning. In addition to assessing how much equity you have, you should also know what it is and how you can increase it.
What is home equity?
In terms of home ownership, your home equity is the difference between what your home is worth and what you owe on any existing mortgages, loans or liens on the property. It measures how much value in the home is yours, to access as you need (keep in mind, you can access all your equity only when selling the home). In other words, home equity is one of the most valuable financial resources you can have.
How much equity do you have?
It might be the original purchase price, but it is likely that the market value has fluctuated since the original purchase. Perhaps the house has appreciated in value, or you might have put in some work to earn sweat equity. There also may have been environmental or social factors that influenced the value of your home, such as the COVID-19 pandemic.
Here are a few options for figuring out what your home is worth:
- Use websites such as Zillow or Redfin to get an estimate of your home’s value
- Use online calculators like this one
- Have a professional appraisal done
- Contact one of our loan officers
How much of your home equity can you use?
If you’re a homeowner who previously subscribed to Redfin or Zillow, you’ve probably seen some exciting emails, the ones saying that your home is currently valued at $100,000 - $200,000 more than what you paid for it.
That sounds like a lot of equity, and that’s exciting. But remember, that’s suggesting what you might get from selling the home. When it comes to accessing your equity through a refinance or a Home Equity Line of Credit (HELOC), the amount of cash you can actually draw will not be the full net value of your equity; it’s usually much less, depending on the lender.
How do you use home equity?
You can benefit from your accumulated equity by selling your home and collecting profits on anything over and above paying off your mortgage.
However, for most people, equity is most useful while still living in the home. Accessing equity through either a Home Equity Line of Credit or refinancing an existing mortgage can give you the cash you need to:
- Pay off debt from credit cards or other loans with a higher interest rate
- Finance home improvement projects
- Pay for college, weddings, or other major life events.
But remember that in most cases, you’ll probably be able to access much less of your equity through a refinance or HELOC than you will if and when you sell the home.
Your home equity can be an affordable way of financing many major financial projects. But you’ll want to be cautious and have a well-established budget in place. If you over-borrow on your equity, your home will be on the line. You could run into trouble if you can’t repay what you borrow.
We’re here to help
Using the equity in your home is a common method of pursuing financial security. Given the tendency of homes to retain or increase in value, equity gives you flexibility for a variety of financial goals. It’s useful in your planning to figure out how much equity you’ve accumulated. However, since your equity is tied to your home, it’s important to spend only what you can afford to repay.
Our Real Estate Officers have the local expertise about housing markets and home values to help answer questions you might have about whether accessing your home’s equity is a good option for your current needs.